Buy-to-let landlords to be squeezed further
The government plans to make it less attractive for individuals to enter or stay in the buy-to-let market.
From 1 April 2016 the chancellor plans to introduce higher rates of stamp duty land tax (SDLT) on the purchases of additional residential properties that cost more than £40k, which will catch most buy-to-let properties. Rates are expected to rise by 3% above current rates, increasing the marginal rate of SDLT on a £250k property from 2% to 5%.
This will affect buy-to-let landlords and those with second homes, but is expected to exempt corporates owning more than 15 properties, although the detail is to be consulted on.
In addition, the deadline for any related capital gains tax due on a disposal is to be brought forward by the end of the decade, requiring reporting and payment within 30 days. This is not due to affect properties where private residence relief can be claimed.
Tina Riches, national tax partner at Smith & Williamson, the accountancy and investment management group, said:
“The additional requirement for businesses and landlords to report income quarterly to HMRC from 2020, will also be extremely unwelcome red tape.”
The government will use some of the additional tax collected to provide £60m for communities in England where the impact of second homes on the availability of affordable housing is particularly acute.
“This will be a further nail in the coffin of the buy-to-let market. The government is rightly keen to ensure that as many individuals as possible can buy their own homes, however, it is going to be difficult for those who have given up other jobs and invested in this market. Besides, in the short term, rents are likely to go up making it very hard for first time buyers to save.
“These measures are in addition to the finance cost relief restrictions announced in the Summer Budget, which will make highly geared property businesses unviable. Landlords who are not already in the process of reviewing their portfolios will need to do so before long. Those with a large portfolio may wish to consider incorporation and some others may look at furnished holiday lettings. Either way, they should discuss their options with their tax adviser.”