Large-scale property investors are surprised to find that they will be subject to the 3% Stamp Duty surcharge set to come into force on 1st April. It was originally thought that corporate investors purchasing more than 15 properties in one transaction would be exempt.
However, Chancellor George Osborne revealed in Wednesday’s Budget 2016 that institutional investors will be charged an extra 3% Stamp Duty on buy-to-let property purchases from next month.
Large-Scale Property Investors Will be Hit by Higher Stamp Duty
From 1st April, buy-to-let landlords and second homebuyers will be charged an additional 3% of the property tax on properties worth over £40,000.
Finance expert Paul Mahoney, of Nova Financial, reacts to the news: “The Stamp Duty changes were confirmed as expected, with a slight surprise regarding that it will apply to limited companies purchasing over 15 properties. Some were hoping the changes would be delayed, but that wasn’t to be.”
After a boom in the buy-to-let market since the beginning of the year, many industry experts have been calling for the change to be postponed, citing difficulty in completing transactions ahead of the Stamp Duty deadline. Conveyancers even urged the Chancellor to scrap the plans altogether.
The Treasury believes that it will raise over £600m from increasing the tax, some of which will fund a new £115m scheme to help the homeless.
The Managing Director of the Association of Residential Letting Agents (ARLA), David Cox, responds to Wednesday’s announcement: “In November, when Mr. Osborne announced an increase in Stamp Duty tax on buy-to-let properties, we described this as a catastrophic move.
“Today’s news that larger investors will also have to pay the tax is even worse. Professional landlords – those who typically own more than 15 properties – play a vital role in providing rental stock to the market, and providing the army of renters we have in this country with housing.”
He continues: “Our members forecast that the supply of buy-to-let properties will dwindle when the new tax comes into effect, and this news means that supply will fall even faster and harder. We’re already in a position where demand outstrips supply, and as supply falls, rent costs rise, meaning the goal of homeownership falls even further out of reach for most of the country’s renters.”1
However, the Budget did include some good news for buy-to-let landlords, who previously feared that they would be unfairly caught out by the new tax rates.
However, the grace period during which those who have an overlap between owning two properties can claim a refund on the higher rates has been extended to 36 months, from an originally planned 18 months.
This means that people who own two homes but are trying to sell one will get some breathing room.