The UK government have announced plans to increase stamp duty rates for anyone seeking to buy a second home as well as investors in buy-to-let property. As one might imagine, this news has not been received well among many property investment groups.
The change is due to come in during April of 2016, and will see stamp duty calculated at an additional 3% on top of the basic rate already in place. The increased rate is projected to bring in around £880m to the Treasury over the course of just four years. However, there is one section of people who will be exempt from the charge, and that’s large corporate investors.
Anger in the Buy-to-Let Industry
Several big players in the buy-to-let industry have already made statements in response to the Chancellor’s announcement during his recent financial statement. The Managing Director of the Association of Residential Letting Agents, David Cox, said, “Increasing tax for landlords will increase rents and reduce property standards for tenants. To make owning a [buy-to-let] property financially viable, landlords will need to pass on the increased stamp duty costs to tenants, who will in turn see less spent on maintaining their property and, of course, see increased rents.”
Mr Cox also feared the stamp duty changes would have a detrimental effect on new landlords getting involved in the industry. “The changes,” Cox continued, “will also deter new landlords from entering the market, pushing the gap between dwindling supply of available property and growing demand even further apart, which will also in turn push up rental costs. London, where demand is so strong and last year’s stamp duty changes hurt rather than helped, will see tenants having the greatest burden to bear.”
Capital Gains Tax Issues
David Gibbs is a Partner at Alliotts Accountants, and was also apprehensive regarding the possibility of buy-to-let investors having to pay the Capital Gains tax within thirty days of making a property sale. He said the stamp duty raise of 3% meant that “…stamp duty rates will run from 5% for property over £125,000 up to 15% on property over £1.5 million. In addition, when a property is sold from April, 2019, the Capital Gains tax will be due just thirty days after completion. Ultimately this set of proposals could drive buy-to-let investors out of the market leading to a serious shortage of rental property.”
There has been plenty of other dissent from the buy-to-let industry, though it remains to be seen if their fears will come to fruition. It’s certainly understandable why they are worried though, with the Chancellor’s Autumn financial statement certainly bearing as much bad news for some sectors as it contained good news for others.