Conveyancing Solicitor Update : Stamp Duty set to rise on buy to let properties
Landlords and investors hit hard as Stamp Duty set to rise on buy to let properties and second homes
Conveyancing solicitors are advising clients purchasing property after April of this year that they could be subject to a tenfold increase in stamp duty depending on the value of their purchase.
Stamp Duty Land Tax (SDLT) is scheduled to increase on second properties by 3% in April 2016. The Government Spending Review revealed in November 2015 that the surcharge is being implemented to address the housing shortage by taxing the purchases of buy to let properties and second homes. Expected to generate £625 million in the next financial year, the government has promised to re-invest £60 million back into those communities particularly impacted by second homes. Despite this, the hike in Stamp Duty has been viewed as an attack on Landlords, families and those investing in buy to let properties for the first time as an investment.
But what does this increased stamp duty really mean?
Previously, a second property purchased for under £125,000 would not attract any stamp duty. Now, under the new rules, any second property purchased for over £40,000 will be subject to the higher rates as shown in the table below. For example, a £95,000 property which would previously not have attracted any stamp duty will now be subject to £2,850 SDLT, a considerable hike to the cost of conveyancing.
|Value of second property/buy to let (£)||Current SDLT Payable (£)||SDLT payable after April 2016 (£)||Total Increase in tax (£)|
The tax grab is a real blow to Landlords and is sure to discourage homeowners from investing in the buy to let market. Conveyancing solicitors can expect a surge of work in the coming months as experts forecast a flood in the property market from investors purchasing rental properties before the new policy comes into force. This is likely to drive up house prices – bad news for first time buyers!
Indeed it is not just landlords who will be affected. Conveyancing solicitors will be accustomed to parents jointly purchasing property with their children to ease them onto the property ladder. The scarcity of guarantor mortgage packages available in today’s market means that in order to support their children financially, parents must resort to taking out a joint mortgage with their child. However, under the new guidelines, this will incur increased stamp duty rates as the property will be regarded as a second home of the parent.
For anyone considering conveyance, the flowchart below created by The Telegraph newspaper can be used to find out whether you will be affected by the new increased rates.
Whilst the policy on Stamp Duty Land Tax is still under consultation and not due to be finalised until the budget is unveiled in 2016, anybody who entered the conveyancing process after 25th November 2015 should beware that they may be subjected to the increased rates if they are not due to complete before April 1st.
If yo have any questions for our conveyancing solicitors, call us on 01302 341243