NEW RULES FOR BUY TO LET:
The changes announced in yesterday’s Budget Statement mean those purchasing second homes or buy to let properties are to be hit with a 3% increase in Stamp Duty Land Tax.
The changes were yesterday described by ARLA as a catastrophe for the private rented sector. For an average buy-to-let purchase of £184,000, it will mean an extra Stamp Duty Land Tax bill of £5,520 from next April.
This increased cost to Landlords might be passed on as a reduction in prices, or it might mean the cost is simply passed along to tenants as an increase in rents. Either way, we at Osprey don’t foresee a rush to the exit; why would there be when it does not affect investors with existing buy-to-lets, only new purchases of buy to lets?
The Chancellor’s changes mean that each SDLT band will go up by 3% for buy-to-let properties as follows from next April 1:
Property purchase of £40,000 to £125,000 – Stamp Duty will be levied at 3% (currently 0%)
Up to £250,000 – 5% (currently 2%)
Up to £925,000 – 8% (currently 5%)
Up to £1.5m – 13% (currently 10%)
Over £1.5m – 15% (currently 12%).
The increase in Stamp Duty is expected to raise £30m in 2015/16; £625m in 2016/17; £700m in 2017/18; £760m in 2018/19; and £880m in 2020/21. The money raised will be reinvested into building new homes in areas where local people have been priced out. All good and sensible.
It may be a bitter pill to swallow but it is certainly not a poison pill. We can expect a raft of headlines in the press on the subject over the next few days and week, and we will update you with our own thoughts next week.