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Further Tax Implications for the Buy-to-Let Market





Welcome back to the Experience Invest, where we report on the latest residential property investment news. The buy-to-let market has suffered further tax implications, today we are discussing the facts, as well as the reaction of industry to those changes.

An extra tax on property from April 2016

The chancellor George Osborne announced in his autumn Statement that buy-to-let landlords and those buying second homes in the UK would have to pay a 3% surcharge on each stamp duty band, from April 2016.

The extra stamp duty has been introduced so that people buying a home and families are not ‘squeezed out’ of the housing market, according to the chancellor. The new tax will raise an estimated £880 million for the government by 2021, but will add a significant amount to the cost of buying property for investors and second home buyers.

Investors and second home buyers must pay an extra 3% in stamp duty

Purchasers in this group will now have to pay from 3% tax on any property valued up to £125,000, up to 15% on a property valued over £1.5 million, as illustrated in the table below.

Stamp duty rates on purchases (Source: HMRC)
Property value Standard rate Buy-to-let and second home rate from April 2016
Up to £125,000 0% 3%
£125,000 to £250,000 2% 5%
£250,000 to £925,000 5% 8%
£925,000 to £1,500,000 10% 13%
Over £1,500,000 12% 15%

The industry reacts

Corporate investors are exempt from the charge, which has caused many to believe that the tax is a direct attack on small, private investors. The industry has raised concerns that the new stamp duty could result in house prices being pushed up in the short term, as investors clamour to buy property before the April deadline. While in the longer term, it could result in a drop in the supply of buy-to-let investments, leading to an increase in rents and a reduction in property standards for tenants.

The changes to stamp duty follows an announcement in the summer Budget that from 2017 landlords would only receive the basic rate of tax relief (20%) on mortgage payments. On top of this, new Capital Gains Tax rules will mean anyone selling a property will have to pay the tax within 30 days, rather than at the end of the tax year.

For more property investment news and our full range of residential properties available visit our website.

About Experience Invest

Experience Invest is a London-based independent property company specialising in residential investments, student property and care home investments. The company works with clients across the UK and internationally, and is regularly featured in the property news – see The Telegraph, on Yahoo Finance, and by Reuters for examples of recent articles.

Experience Invest recently announced the launch of One Wolstenholme Square, a brand new residential development in the heart of Liverpool.