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Changes to stamp duty rates on second homes and buy-to-let properties - key points from the Autumn Statement

Changes to stamp duty rates on second homes and buy-to-let properties - key points from the Autumn Statement

Friday 27th November 2015

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Private Client Law Bulletin - Special Issue 96

In the biggest shake up to the stamp duty system since the thresholds were reformed in December 2014, following the Chancellor’s Autumn Statement as of April 2016 landlords and those looking to purchase a second home will now face a 3% surcharge on the rate of stamp duty payable for their property transaction.

At the moment following the reformation of the stamp duty rates a buyer of a property at £275,000 can currently expect to pay £3,750 in tax. However, as of April next year if that buyer was purchasing the property as a buy-to-let investment or a second home then they can expect a tax bill of £10,800. 

The Chancellor has said that this additional surcharge will raise an additional £1bn for the Treasury by 2021. Industry experts warn that this additional tax blow could result in a reduction of investment in the buy-to-let market. This comes at a time when landlords are already facing a lower rate of tax relief on mortgage payments made on buy-to-let properties as well as changes to the capital gains tax rules, which will require them to pay any Capital Gains Tax (CGT) due within 30 days of selling a property.

Tax advice

However, those looking to invest in property after April 2016 would be advised to take tax advice as it may be possible to offset the additional stamp duty payment against any future CGT liability. In addition commercial property with more than 15 properties in their portfolio are expected to be exempt from the new stamp duty charge.

As for whether this change to the stamp duty thresholds will have a serious reduction in the amount of investment in the property market remains to be seen. The chancellor is clearly banking on there being sufficient momentum in this sector to weather the tax increase, and let’s not forget that prior to the stamp duty threshold reforms last year landlords were still prepared to pay the higher “slab rates” of tax that had previously been payable. One effect that is likely to be seen in the short term is that the property market will become inflated in the run up to this change as buy-to-let investors look to acquire properties under the current tax regime.  

If you would like to discuss your estate planning requirements please do not hesitate to contact Louise Scholes or your usual Brabners contact:

Louise Scholes
Senior Associate - Private Client
Tel: 0151 600 3278
Email: louise.scholes@brabners.com