How to Beat the Rise in Stamp Duty on Buy to Let Purchases
The headlines surrounding George Osborne’s recent Autumn Statement focused mainly on the decision to scrap plans to cut tax credits, and while this was a major news item it should be noted that there were several other important points. One of them will affect the housing sector in a big way, and it will spell bad news for anyone who is considering the purchase of a property that is to be let out to others.
From April 2016, purchases of Buy to Let properties and second homes will be subject to an additional 3% Stamp Duty charge, a strategy that will no doubt be a deterrent to some potential investors. The BTL market has been growing recently, but this announcement may cause a slowdown in the coming years as buyers start to rethink their options.
The 3% hike represents a significant rise in costs, and it’s possible that some investors will want to recoup their extra outlay via an increase in rents. For anyone who is thinking about the purchase of a BTL property, it’s a good idea to act fast. The increase takes effect from April 2016, so if a purchase is made before that date then it will be a great deal less expensive. On a £275,000 property, the Stamp Duty will rise from £3,750 to a whopping £12,000.
The clock is ticking for potential buyers
It should be noted that people who are thinking about selling their homes in the near future will also need to take this matter into account. If their house or flat is likely to be of interest to BTL investors, they will restrict their potential market if they wait too long before putting the property on the market. The next few months will almost certainly see a more active market for this reason.
While the increase in BTL Stamp Duty has understandably caused a great deal of concern in the property sector, it should be noted that there were other important announcements during the Autumn Statement. One of them, a pledge to build around 400,000 new homes in the coming years, will be seen as welcome news for a sector that is struggling to keep up with demand.
There will be incentives to construct starter homes, too. Following up on a policy announcement made a year ago, there is to be a 20% discount on prices of such properties. The Government has also pledged to invest in specialist homes for elderly people as well as those with disabilities.