The changes which were announced in the Spending Review and Autumn Statement will add 3% to the rate of stamp duty paid by those who already own property from April 2016.
This means that the tax bill for a buy-to-let property that costs £250,000 will now dramatically increase from £2,500 to £8,800. Another example, a £450,000 property will see the tax rise from £7,500 to £18,000, an increase of over £10,000.
A number of experts have voiced concern over what the new tax could mean for the buy-to-let market. Rachael Griffin, financial planning expert at Old Mutual Wealth, said: “Many landlords are already concerned that the margins on buy-to-let investment are being squeezed and for some this may be the final nail in the coffin. It could trigger a wave of sell-offs from buy-to-let landlords looking to avoid the surcharge in April 2016.”
Other experts feel that these measures may dampen demand within the buy-to-let market as investors see diminishing returns and may decide to re-evaluate the attractiveness of the market as a result of this announcement by the Chancellor.
This is the second blow to buy-to-let investor in 2015. Only earlier this year in the Summer Budget in July came the announcement that landlords’ ability to offset mortgage interest costs against rental income would be reduced. That change will be phased in between 2017 and 2020. It is expected that it will substantially reduce the yields on investment properties and for some make existing buy-to-lets unprofitable.
If you have any queries about how these changes could affect you, please don’t hesitate to contact Orchard & Shipman today. As a company with over 25 years’ experience dealing with private landlords, our team of experts understand the impact a change in government policy can have. We’re readily available to guide and advise you through these sometimes confusing changes in legislation.
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