Final nail in the coffin for buy-to-let?

by Ed Firmin


Posted on Monday, November 30th, 2015 at 10:00



Last week’s Autumn Statement from the Chancellor dropped another bombshell for landlords.

Not content with restricting the tax relief on mortgage interest, the Chancellor has now announced an additional 3% stamp duty surcharge on buy-to-let and second properties (above £40,000) from April 2016.

Which is huge.

The Chancellor believes that landlords buying buy-to-let properties are restricting the chance for families to be able to afford their own home to buy. And so he’s penalising landlords by adding this additional hike. He thinks this would make it more of a level playing field for all.

What does this mean for landlords? Take this example. On a £150,000 property bought today, the stamp duty cost is £500. Buying the same property in April 2016, the stamp duty will jump to a massive £5,000. £4,500 difference!

Landlords were already facing their profits being squeezed by the mortgage interest tax relief restrictions, so this additional cost could mean many landlords exiting the market.

There may also be a huge rush for landlords to buy properties to add to their portfolio before the additional charge is introduced, I know I would!

However, this additional charge will not apply to companies, which means that many landlords may consider setting themselves up as a company. That could mean that not only will they be able to avoid the interest tax relief, but may also mean avoiding the stamp duty increase too. A possible solution – but then there are added difficulties with paying tax on dividends, having to pay tax on transferring a property from an individual to a company, possible issues with lenders transferring any mortgages…

It’s not easy this one!

It will also have a knock-on effect on tenants, if there are going to be less houses available to rent, then competition will drive up rent, as will the fact that landlords have to cover additional costs associated with buying the property in the first place, they’ll need to make that money back. So who’s going to pay?

Finally, there was also a sneaky announcement concerning Capital Gains Tax. From April 2019, if there is any Capital Gains Tax to pay on the disposal of a property, it will have to be paid just 30 days after completion, compared to up to 21 months as it stands now. Ouch. It’s not looking at all good for landlords.

If you’d like some advice on what these latest announcements might mean for you, please get in touch. I’m not a financial adviser, but I can offer advice from a fellow buy-to-let investor’s point of view!

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