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17-04-2016

Buy-to-let landlords have been hit with new costs from 1 April when a controversial increase of 3% was added to stamp duty. The change, which aims to free up housing for buyers, will add thousands to buy-to-let property transactions.

The buy-to-let sector has long been a controversial part of the property market, with critics blaming landlords for pushing up property prices and keeping first-time buyers locked out. In recent budgets and spending reviews, Chancellor George Osborne has turned his attention to landlords.

First he announced reductions in mortgage interest relief from 2017, but before that landlords are being hit with an extra 3% charge on each stamp duty rate band, which vary by property value.

  • For example, anyone buying a £200,000 second home or buy to let before April paid stamp duty of £1,500. This is based on paying 0% on the first £125,000 of the property value and 2% on the portion between £125,001 and £250,000.
  • But from 1 April, landlords pay 3% for the first £125,000 and 5% on the amount between £125,001 and £250,00, giving them a total bill of £7,500. So a landlord would end up paying five times more than a private purchaser in this example.

It is not just landlords that will be hit but anyone owning a second home; for example, parents buying a property for their children or a couple purchasing a home together, where one is already a homeowner. Anyone owning a second property that isn't their main residence and buying another, or replacing the one they don't live in, is likely to get caught up in the changes.

So, if you already own a portfolio of buy-to-let properties, or have a second home, but plan to buy yourself a new home to live in and sell your old one then you will not have to pay the extra stamp duty.

The higher rates only apply to additional properties purchased in England, Wales and Northern Ireland on or after April 1, 2016.

Heralded punitive changes in the last financial statement to capital gains tax on second properties will also affect investment and inheritance planning.

If you think you might be affected by the changes to second properties, or if you want information or advice, please contact us on 020 7400 7770 or email info@moonbeever.com.

Daniel Moore
Partner

This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained here. 

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