The Autumn Statement in December 2015, brought some more bad news for property investors with changes to Stamp Duty Land Tax.
Higher rates of Stamp Duty Land Tax (SDLT) will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes, from 1 April 2016.
Additional rate of Stamp Duty Land Tax
There will be an additional rate of Stamp Duty Land Tax of 3% from 1 April 2016. For example, if an additional home is purchased for £250,000, 3% will be due on the first £125,000 (instead of 0%) and 5% will be due on the remaining £125,000 (instead of 2% currently). That is an increase of tax to be paid, from £2,500 currently to £10,000 from 1 April 2016.
The higher rate will not apply if you are replacing your main residence of if you are purchasing your first home.
The new rules might create problems for home owners who purchase a new home before selling their current property if they are not able to sell their old home within 18 months of acquiring a new one.
Stamp Duty Land Tax uplift results in increase in sales
According to a Residential Market Survey by the Royal Institute of Chartered Surveyors, there has been a momentum of property investors trying to beat the April Stamp Duty Land Tax uplift. Approximately, 75% of respondents to the survey saw an increase in purchase activity. About one-half of respondents were unsure how the more penal enviroment will affect the buy to let market in the long term. It remains to be seen if landlords will pass the additional tax on to tenants by increasing rents.