Stamp Duty Shocker in Autumn Budget
Hot on the heels of the previous budget, landlords have been struck by yet another blow. From 1st April 2016, all second homes and buy-to-let properties will attract an additional 3% stamp duty rate.
This announcement comes just months after buy-to-let investors discovered they’d be limited to offsetting their mortgage interest against a basic tax rate.
Those hoping to avoid the additional 3% by buying under the threshold of £125,000 are likely to be disappointed, as the 3% is applicable on all transactions over £40,000.
George Osbourne has earmarked the funds for providing homes for first time buyers, saying “The government will use some of the additional tax collected to provide £60 million for communities in England where the impact of second homes is particularly acute. The tax receipts will help towards doubling the affordable housing budget. This will help first time buyers.
“Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy,” he added.
It’s a shrewd move for the Conservatives. Home owners are more likely to vote Conservative than those renting . In a housing crisis, the more houses that are owned by landlords, the fewer are available to be bought by owner occupants. It’s a vote winner that Margaret Thatcher used to great effect with Right to Buy, and it has four years to take effect before the next general election.
Interestingly, the stamp duty increase will not apply in Scotland, where stamp duty has been replaced by Land and Property Transaction Tax. Less surprisingly, it will also not apply to caravans, mobile homes or houseboats.
So what does this mean for estate and letting agents?
Estate Agents may see a rush of investors looking to purchase prior to the 1st April deadline, and fewer afterwards, but largely it will be business as usual. In the long term, coupled with the loss of full tax relief, more rental properties may become owner occupied, which is good news for estate agents as owner occupiers tend to move more frequently. A sell off of former buy to let properties is also good news for estate agents who are suffering from a shortage of stock.
Letting agents, however, won’t be feeling quite as cheery. With the clear discouragement of the private rental sector there could be rocky times ahead.
