Chancellor George Osborne in his autumn statement today said he would introduce new rates of stamp duty from next April that would include a 3 per cent hike in duty on the purchases of buy-to-let rentals and second homes.
“So I am introducing new rates of Stamp Duty that will be 3 per cent higher on the purchase of additional properties like buy-to-lets and second homes.”, said Mr Osborne.
The duty will fall on small-scale private investment only, as the Chancellor says he will “consult on the details so that corporate property development isn’t affected”.
The extra stamp duty is calculated to raise almost a billion pounds by 2021, a sum which the Chancellor plans to reinvest in “local communities in London and places like Cornwall which are being priced out of home ownership”.
“The funds we raise will help building the new homes. So this Spending Review delivers:
- A doubling of the housing budget.
- 400,000 new homes; with extra support for London.
- Estates regenerated.
- Right to Buy rolled-out.
- Paid for by a tax on buy-to-lets and second homes.”
The prospect of a new stamp duty tax on buy-to-let, on top of the removal of mortgage interest relief over a 4 to 5 year period announced in the summer, will do little to help the Government’s stated aim of supporting small landlords and the private rented sector (PRS).
Coupled with the recent stringent new regulations for rental property management and the requirement to do “Right-to-Rent” checks by all landlords from 1st February 2016, it seems the government could not do more to cool the buy-to-let market, which many in the industry will admit, has been “overheating”.
The thrust of Government policy now seems to head in the direction of encouraging more house building, more how ownership as opposed to renting, and to encourage more corporate investment into the rental space.
As the Chancellor said of his statement, it’s “Delivered by a government committed to helping working people who want to buy their own home.”
The government is planning to sell old prisons which will create space for housing in inner-cities. The Chancellor said that one of the great social failures of our age has been the failure to build enough houses.
“Above all, we choose to build the homes that people can buy. For there is a growing crisis of home ownership in our country. 15 years ago, around 60% of people under 35 owned their own home, next year it’s set to be just half of that, he said.
“We made a start on tackling this in the last Parliament, and with schemes like our Help to Buy the number of first time buyers rose by nearly 60%. But we haven’t done nearly enough yet. So it’s time to do much more.”
As one might expect, the reaction to Mr Osborne’s spending review from private landlords and landlords’ associations has been swift and angry.
“If the chancellor wants to wipe out buy to let, why doesn’t he just say so?” says the National Landlords’ Association CEO Richard Lambert.
Commenting on the Chancellor’s announcement on increased stamp duty land tax (SDLT) on buy-to-let property purchases, he says:
“The Chancellor’s political intention is crystal clear; he wants to choke off future investment in private properties to rent.
“The exemption for corporate investment makes this effectively an attack on the small private landlords who responded to the housing crisis by putting their own money into providing homes by the party that they put their faith in at the election.
“If it’s the Chancellor’s intention to completely eradicate buy to let in the UK then it’s a mystery to us why he doesn’t just come out and say so”.
The Residential Landlords’ Association (RLA) Tweeted: “Osborne hits Buy to Let again! Stamp Duty to be 3% higher than residential properties”,
The RLA says,
Tenants will be the biggest losers from today’s announcement of a higher stamp duty on the purchase of buy to let homes and this will only worsen the current shortage of accommodation and drive up the cost of rents.
“Given that the private rented sector has accounted for the large majority of new dwellings created in England between 1996 and 2013, this extra burden threatens to reduce the number of new homes available at a time when demand continues to rise” their press release says.
Commenting, Alan Ward, Chairman of the Residential Landlords Association said:
“The biggest losers from today’s statement are tenants who will now find it even harder to get the accommodation they want at a price they can afford. The extra stamp duty on buy to lets will exacerbate an already serious shortage of properties in many areas reducing choice and driving up rents.
“The government should be encouraging landlords to invest, not doing everything they can to discourage them.”
Mike Chapman, Senior Manager, Corporate Tax at Knill James Chartered Accountants, commented:
“As if George Osborne’s announcement in the summer budget of the phasing out of higher-rate tax relief on landlords’ interest payments wasn’t enough, today’s Autumn Statement introduces a further fiscal double whammy for landlords which could have major consequences for the residential property market.
“Firstly, higher rates of Stamp Duty Land Tax (SDLT) will be charged on purchases of additional rental property (above £40,000) from 1 April 2016 aimed specifically at buy-to-let properties and second homes. The higher rates will be three percentage points above current SDLT rates and the exclusion of companies from the charge indicates that the Government sees the freeing up of residential property currently in private hands as key to its housing policy.
“So, there will pain on the way into the buy-to-let market through SDLT and a second announcement in the Statement revealed an unwelcome Capital Gains Tax (CGT) surprise on exit. From April 2019, a payment on account of any CGT on the disposal of residential property will be due just 30 days after completion. This compares to the current rules where the settlement of the tax due can be anything up to 21 months after disposal depending when in the fiscal year the sale occurs.
“What will the affect be on the property market? Clearly landlords who have maximised their borrowings with a view to enjoying capital growth may now seek to restrict their financial exposure by disposing of parts of their property portfolios. Where such properties are standing at a gain, disposal before the CGT acceleration is due will clearly be advisable.”
See the full details of the Chancellor’s Autumn Statement here
— LandlordZONE® (@LandlordZONE) November 25, 2015