This year brings about changes for purchasers of buy-to-let properties and second homes. Property investment will become unfavourable, as anyone looking to purchase these types of assets will be subject to new Stamp Duty Land Tax (SDLT) rates.
This means that from 1st April 2016, SDLT rates for residential property will be 3% higher than the current rates and will be on a progressive/tiered basis.
Up until then, anyone purchasing a buy-to-let property at a value of £125,000 would not have paid any SDLT but after April 2016 they would be liable for £3,750 in SDLT.
For the average buy-to-let property, which costs around £184,000, the changes mean a fivefold increase in stamp duty from £1,180 to £6,700. A £250,000 buy-to-let bought today has a £2,500 stamp duty bill; it will carry a £10,000 tax burden in three months – a hike of £7,500.
This restriction only applies to investors with less than 15 properties. While that may seem unfair to individuals wanting to purchase a second property, buy-to-let landlords will also be hit by a change to Capital Gains Tax (CGT) rules as well as tax relief rules.
The changes being implemented have their own advantages and disadvantages:
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New homeowners will have a larger range of properties to buy from as they will not have been taken up by investors
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However property investors will be restricted on the benefit from spending in buy-to-let property; this combined with low annuity rates in the markets means that savers will have to invest in other asset classes in order get some growth.
This is a big blow to investors, who saw buy-to-let property investment as an alternative to pensions and especially when coupled with the rules being implemented in 2017 which restrict tax relief.
But this is where Platinum can help.
We are happy to speak to anyone who is concerned about how these changes will impact on their investments overall. Our specialist Advisers can help you understand how these changes will affect you and maybe look at alternative strategies to buy-to-let properties.