The Government has said that it is concerned at the effect that buy-to-let investors have on the ability of first time buyers to get onto the property ladder. An increase in SDLT rates for buy-to-let properties and second homes is yet a further measure announced this year to address this perceived problem.
From 1 April 2016 the Chancellor plans to introduce higher rates of stamp duty land tax (SDLT) on the purchases of additional residential properties that cost more than £40,000, which will catch most buy-to-let property acquisitions. Rates are expected to be 3 percentage points above current rates. To illustrate the effect, on a £250,000 property the SDLT charge will rise from £2,500 to possibly £10,000.
This will affect buy-to-let and second home purchases, but is expected to exempt corporates owning more than 15 properties, although the detail is to be consulted on.
In addition, the deadline for any related capital gains tax due on a disposal is to be brought forward, by the end of the decade, requiring reporting and payment within 30 days.
The Government will use some of the additional tax collected to provide £60 million for communities in England where the impact of second homes on the availability of affordable housing is particularly acute.
These measures are in addition to the finance cost relief restrictions announced in the Summer Budget, which will make highly geared property businesses less viable. Landlords who are not already in the process of reviewing their portfolios will need to do so before long. Those with a large portfolio may wish to consider incorporation and some others may look at furnished holiday lettings. Either way, they should discuss their options with their tax adviser.
For more information please contact Robert King, Partner, Smith & Williamson. Robert.firstname.lastname@example.org