New Tax Year and Commercial Property Issues

April 2016 will see a rise in stamp duty that could affect both buy-to-let landlords and second home purchasers who will now have to pay more. This applies to those who live in England and Wales and was introduced by Chancellor George Osbourne in his Autumn statement last year.

Largely seen as negative move by landlords who say that the increase could work to stop future investment in the sector, no comfort for homeowners was provided by the extension to the Right to Buy Scheme in London and the surrounding Home Counties or the provision of more money for starter homes to help new buyers.

Stamp Duty Land Tax is payable in England and Wales if you purchase a residential property over the value of £125,000 or a business property over £150,000. This applies whether you buy a freehold or a new or existing leasehold and needs to be paid within 30 days of completion of the sale.

For landlords, the rise in stamp duty will be 3% across the board and could cause a significant impact on the buy to let market. That means for a house that is being sold and is worth over £125,000, instead of paying 2% landlords will be charged 5%. For an averagely priced home that could see landlords paying an extra £5,000 or more.

This is not the only area where landlords are set to suffer higher costs. By 2019 they are going to have also pay up their Capital Gains Tax quicker when they sell their property – within thirty days of completion rather than at the usual end of the year. If you add to this the reduction planned in the rate of tax relief on buy to let mortgages, there are many saying that the Chancellor is trying to curtail the private rental business and do it severe damage.

The fact that new landlords could be paying up to five times more than a private first time purchaser for their home has not gone unnoticed. But the changes may well have an impact on other kinds of house purchases. Parents who are buying properties for their children or those that have a second home are liable to find themselves caught up in the changes. Owners who already have several buy to let properties and then want to buy a new home for themselves could similarly be caught out by the premium charge on stamp duty.

Many have wondered whether they can flip their old home (moving from an old home and leasing it out while using the rental property as your stated main residence) and avoid the extra stamp duty but the Treasury is reportedly going to be very strict on any attempt to buck the system.

There could well be confusing times ahead when it comes to stamp duty and many people, not just buy to let landlords could be affected by the hike in charges. What impact it has on the rental market in the years to come remains to be seen but getting clear advice about what you owe from a reliable conveyancing solicitor is important if you don’t want to end up paying the wrong amount.

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