Last week’s Autumn Statement may lead to property investors thinking that the government does not like them.
With effect from 1 April 2016 buyers of ‘additional properties’ will be charged an extra 3 per cent rate of stamp duty land tax (SDLT). The phrase ‘additional properties’ explicitly includes second homes as well as residential lets. The Stamp duty rate for second/buy to let properties will become:
- 3% on properties costing £40,000 – £125,000
- 5% on £125,001 – £250,000
- 8% on £250,001 – £925,000
- 13% on £925,001 to £1.5M
- 15% above £1.5M
Furthermore, from 2019 capital gains tax will have to be paid within 30 days of a disposal of residential property, instead of by 31 January of the next tax year under the current rules. This is a reduction in the window of paying CGT on a residential property sale from 10 – 22 months down to 30 days.
These announcements are on top of restrictions on loan interest on buy to let properties introduced in the July Budget. Here is a reminder of these proposed changes:
Tax relief on landlords’ finance costs is to be restricted to the basic rate of tax which is currently 20%. This change is to be phased in over a 4 year period from April 2017 as follows:
- In 2017/2018, the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate reduction.
- In 2018/2019, 50% finance costs reduction, with the remaining 50% being available as a basic rate reduction.
- In 2019/2020, 25% finance costs reduction, with the remaining 75% being available as a basic rate reduction.
- From 2020/2021, all finance costs incurred by a landlord will be given a basic rate tax reduction.
These proposals represent a significant change for those with a property portfolio. For many investors, the restriction on loan interest relief and the extra 3% SDLT may make a buy to let investment less attractive.
If you would like more information, please get in touch with Brian King at [email protected] or alternatively on 024 7622 1046.