Second Homes and ‘Buy to Lets’ following the Autumn Statement 2015
Having had the opportunity to ruminate on the recent Autumn Statement, what has become clear is the Government’s intention to target those interested in the ‘buy to let’ market or those looking for second homes.
Previously, the Chancellor had already made changes to both the Mortgage Interest Tax Relief and Annual Wear and Tear Allowance which financially penalised those residential landlords. However, the Chancellor is intending now to push further, confirming that:
• Those purchasing a ‘buy to let’ property or second home in England and Wales will have to pay an additional 3% Stamp Duty on top of the regular Stamp Duty bandings as from 1 April 2016
• Capital Gains Tax payable on residential property sales not subject to Main Residence Relief will have to pay any tax due within 30 days of sale rather than waiting until the end of the tax year as currently.
So by way of example, the 3% additional Stamp Duty Land Tax (SDLT) means that at one end of the scale, landlords purchasing properties costing £125,000 or less will still incur 3% SDLT; those in one of the middling bracket (£250,001 to £925,001) will incur 8%; and the top rate (over £1.5 million) will increase to 15%.
The Government has suggested that it is likely to implement a reduction in the amount of time you have to pay your SDLT from the current 30 days to 14 days. This means not only will the Government get their money more quickly, they are also likely to pick up more late payment penalties.
Purchases completed before April 2016 will not be affected. Additional knock on effects on the housing market are also anticipated within the industry. Experts predict that those who continue to acquire ‘buy to let’ properties are likely to, at some point, look to pass on the extra cost to the tenants in terms of higher rents. Indeed, a reduction in the number of available properties to rent at all, by the law of supply and demand, could also have an effect on rental values.
All in all, if you are thinking of investing in a residential buy to let, you have very little time to do so if you want to avoid a hefty tax increase.George Ide