What you need to know about the increase in stamp duty on buy-to-let and second homes.

Posted on 3rd December 2015 by Jordan Holmes

George Osborne’s Autumn Statement saw a 3% increase on stamp duty land tax for people buying a buy-to-let or second home from April 2016. This delivers a big blow to landlord investors, significantly increasing purchase costs: on a property worth £175,000 stamp duty will rise from £1,000 to £6,250 and on a property worth £500,000 stamp duty will rise from £15,000 to a whopping £30,000. There will be no duty payable on second properties costing under £40,000.

Jamie Cooke, sales director at IAM Sold said: “Despite the rise in stamp duty, auction is still a very cost effective way of purchasing a second home or buy-to-let property with some investment properties selling for below the £40,000 threshold.”

The Chancellor defended the hike in stamp duty by claiming the change will stop buy-to-let buyers from pricing out families and first time buyers. A first-time buyer buying a property worth £250,000 will pay £2,500 in stamp duty, whereas a landlord would have to pay £10,000. He also said that the increase in tax will go towards paying for more affordable housing. The 3% surcharge is set to raise shy of £1billion for the Treasury.

Agents and brokers view the increase as an attack on the buy-to-let market claiming it will add complications to the buying process, create disparities in tax treatment across the UK and subdue house prices.

Critics claim that the rise in stamp duty will be damaging to the private rental sector and could see a large increase in rent for tenants across the board as well as a drop in property standards. This is due to the fact that, to make purchasing a buy-to-let property financially viable, landlords will pass on the costs of increasing stamp duty to tenants which will result in less being spent on maintaining properties and pushing up rent.

In a further blow to amateur landlords and small investors, super rich investors boasting a portfolio of 15 or more properties will be exempt from the additional charge. The Chancellor is also now consulting on further possible exemptions for large investors and companies.

Ultimately it appears that the rise in stamp duty will have the greatest effect on amateur landlords and small investors and will make buy-to-let a less desirable option for homeowners looking to boost their pension with an investment in property. This in turn has the potential to drive up rental prices, decrease property standards and lower the number of rental properties available on the market.

Jordan Holmes

Marketing Executive

My name is Jordan Holmes and I am the Communications and Media Production Lead at iamproperty. I have a BA (Hons) in Marketing and Advertising Management which I obtained from Leeds Metropolitan University. Read more posts from Jordan
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