Chancellor George Osborne landed buy-to-let landlords another shock by announcing a 3 per cent stamp duty surcharge on property purchases from 1 April 2016.
The addition of a 3 per cent extra charge for buy-to-let and second homes on all stamp duty bands above a £40,000 starting level will more than treble the bill for buying a £275,000 home – hiking it from £3,750 to £12,000.
Delivering his Autumn Statement, Osborne said: ‘Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy. So I am introducing new rates of stamp duty that will be three per cent higher on the purchase of additional properties like buy-to-lets and second homes.’
Property experts have warned that the move could distort the housing market, with a rush of buy-to-let and second home purchases before the start of April. It was described as ‘catastrophic news for the private rental sector’ by David Cox, the head of the Association of Residential Letting Agents. He added: ‘It will be introduced from April next year and we’ll consult on the details so that corporate property development isn’t affected.
Higher rates of stamp duty will be charged on purchases of additional residential properties, such as buy-to-let properties and second homes, with effect from 1 April 2016.
Currently, buyers pay no stamp duty on the first £125,000, then 2 per cent on £125,000 to £250,000 and 5 per cent above £250,000 to £500,000, rates continue to step up above this. For those buying a buy-to-let property or second home, stamp duty will now be 3 per cent on homes between £40,000 and £125,000, 5 per cent to £250,000 and 8 per cent to £500,000.
The higher rates will be 3 percentage points above the current SDLT rates. The Chancellor said that the tax receipts will help towards doubling the affordable housing budget and will help first time buyers.
The higher stamp duty will be charged on purchases of additional residential properties above £40,000. It will see 3 percentage points added to very band – including the previously tax-free element.
Stuart Gregory, a mortgage expert, said on social media website Twitter: ‘Osborne just killed buy-to-let.’
Robert Pullen, tax manager, at Blick Rothenberg LLP said: ‘Buy-to-Let purchases from April 2016 will suffer an additional three per cent stamp duty. ‘This is likely to cause initial spike in house prices as investors rush to buy, but the long term impacts are not known. It could result in even larger rent costs as landlords seek to recover the new tax.’
Michael Wistow, head of tax, Berwin Leighton Paisner, said: ‘To solve the housing crisis, the UK needs more houses to buy and more houses to rent. ‘Increasing stamp duty on certain classes of investors in buy-to-let is distortive and appears counter intuitive and will only restrict supply.
The property and buy-to-let industry have reacted with shock to the news of the buy-to-let tax hike.