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Property investors hit by new tax increase

26 November 2015

Tax IncreaseBuy to let landlords face another tax blow as Chancellor George Osborne increases stamp duty rates for the purchase of investment properties.

From April 2016, stamp duty rates will have a surcharge of 3% for purchases of homes valued at more than £40,000 intended as rental properties or second homes.

“More and more homes are being bought as buy to lets or second homes,” Osborne said during his spending review and Autumn Statement 2015 speech in Parliament.

“Many of them are cash purchases that aren’t affected by the restrictions I introduced in the Budget on mortgage interest relief; and many of them are bought by those who aren’t resident in this country.

“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 higher on the purchase of additional properties like buy to lets and second homes.”

Osborne explained increasing stamp duty for property investors would raise an estimated £1 billion extra tax by 2021.

He added that the government will reinvest some of that money in local communities in London and places like Cornwall where local people are priced out of home ownership by property investors.

The new stamp duty rates will not apply to caravans, mobile homes or house boats.

More details about the measure are expected in a consultation paper early in 2016.

The likely land duty stamp tax rates from April 2016 will be:

Property purchase price Residential stamp duty rate
 
Investment stamp duty rate
£40,001 to £125,000 0% 3%
£125,001 to £250,000 2% 5%
£250,001 to £925,000 5% 8%
£925,001 to £1.5 million 10% 13%
Over £1.5 million 12% 15%



Two more tax consultations are on the way next year:

The government proposes to shrink the time allowed for paying stamp duty from 30 days to 14 days from 2017.

From April 2019, property investors will have 30 days to settle up any capital gains tax bills on disposal of residential property. This will align UK taxpayers with non-residents, who already have the 30 day limit imposed on their property transactions.