Posts with tag: second homes

Tax Clampdown Threatened for Owners of Second Homes

Published On: November 9, 2018 at 10:51 am

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Tax rules concerning owners of second homes being valued for business rates, rather than Council Tax, could be clamped down on by the Government.

A new consultation has launched on the plans, detailing the Government’s attempts to close a tax loophole being exploited by the owners of second homes.

Currently, if an owner declares that their property is available for holiday lets, then they can receive favourable tax treatment. However, they do not have to prove that the property is actually let, or even whether it was marketed for letting.

Tax Clampdown Threatened for Owners of Second Homes

Tax Clampdown Threatened for Owners of Second Homes

Holiday lets on business rates are likely to qualify for Small Business Rate Relief, which provides 100% relief on business rates, meaning that no tax is due on properties with a rateable value of £12,000 or less.

For properties with a rateable value of £12,001-£15,000, the rate of relief drops gradually, from 100% to 0%.

To qualify, the property must be available for letting for short periods totalling at least 140 days per year.

As of April this year, 47,000 holiday lets in England were liable for business rates, of which 96% qualified for relief, having rateable values of £12,000 or less.

However, the Government is concerned that some owners of second homes are gaming the system.

In a new consultation, the Government is proposing to toughen up the 140-day rule.

It suggests that, to qualify for business rates, in the previous year, the property must have been available for at least 140 days and actually have been let for short periods totalling at least 70 days.

Local Government Minister Rishi Sunak says: “We’re aware of concerns that the current arrangements for valuing second homes for business rates and claiming relief do not provide strong enough protections against abuse.

“We are seeking views on whether we should strengthen the checks already in place to ensure second home owners have to pay Council Tax, while ensuring genuine holiday let businesses are able to demonstrate they are eligible for business rates relief.”

The consultation, which can be accessed here, will run until 16th January 2019.

Would you be affected by this tax clampdown?

30% Increase in Second Home Ownership Since Early 2000s

Published On: August 21, 2017 at 8:07 am

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Categories: Property News

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There has been a 30% increase in second home ownership in Britain between 2000-02 and 2012-14, according to new analysis from the Resolution Foundation.

The number of adults who own multiple properties has risen from 1.6m in 2000-02 to 5.2m (one in ten adults) in 2012-14.

Combined with falling homeownership since the early 2000s, the rise of second home ownership has underpinned the increasing concentration of property wealth within a declining proportion of families. In contrast to the one in ten adults with multiple sources of property wealth, four in ten (40%) adults have no property wealth at all – up from 35% in 2000-02 and the same level as in 1993-95.

The research shows that, alongside an increase in the number of people with additional properties, the average value of assets held in these properties has risen by 20% in real terms between 2000-02 and 2012-14, from £125,000 to £150,000. The wealth held in additional properties had a gross value of £760 billion in 2012-14 – 15% of the £5.2 trillion held in gross property wealth overall.

The Resolution Foundation says that there is a clear generational split in terms of who owns second homes, with those in prime age and the early stages of retirement having accumulated the most.

30% Increase in Second Home Ownership Since Early 2000s

30% Increase in Second Home Ownership Since Early 2000s

Multiple homeowners are most likely to be baby boomers – the group born between 1946-1965 and currently aged between 52-71. Boomers account for over half (52%) of all the wealth held in additional properties, with far higher additional property asset levels than those now in their 70s and 80s held at the same age.

Generation X – those born between 1966-1980 and currently aged between 37-51 – accounts for a further quarter (25%) of additional property wealth.

By contrast, millennials – those born since 1981 – own just 3% of the additional properties assets and are the first group since records began to have less of it than their predecessors did at the same age. For example, those born in the 1980s had less than half the additional property assets at age 26 than those born in the 1970s did at that age (an average of £2,600 across all adults born in the 1980s, compared to £5,500 for those born in the 1970s).

While second home ownership is sometimes depicted as a common way for typical workers to shore up savings, or for ordinary pensioners to boost their retirement income by letting properties out, the analysis found that those with a second home are overwhelmingly rich and wealthy.

88% of additional property owners are in the top half of the wealth distribution, while 79% of adults who earn income from additional properties as landlords are in the top half of the income distribution.

Second home owners continue to stand out, even when compared to their peers. For example, over four fifths (82%) of baby boomer second home owners are in the wealthiest half of their generation.

There are also stark regional differences in those who earn income from a second home as a landlord. Nearly six in ten (59%) landlords are found in the South West, South East, East of England and London, which are also the areas where incomes and average wealth are highest.

We remind all those considering second home ownership that additional properties are now subject to a 3% Stamp Duty surcharge – including buy-to-let properties. Find out more: /landlords-guide-3-stamp-duty-surcharge/

The Senior Policy Analyst at the Resolution Foundation, Laura Gardiner, says: “Multiple property ownership is still a minority sport, but a growing one that represents a significant boost to the wealth pots of those lucky enough to own second homes. People with second homes not only have an investment that they can turn to in times of need, for instance in later life when care is required, but if the property is rented out, they also see a boost to their incomes here and now.

“Contrary to the popular narrative, these second home owners are rarely your typical middle-income worker shoring up savings or ordinary retiree boosting pension income. They tend to be baby boomers who are very wealthy indeed relative to their peers, living in the south and east of England.”

She continues: “With young people much less likely to own a home at all than their predecessors at the same age, the growing concentration of property wealth among fewer families raises concerns not just for their living standards, but for wealth inequality of our country as a whole. Recent steps to increase Stamp Duty on second homes and reduce tax relief on buy-to-let mortgages are attempts to address this challenge, but policymakers should consider what more can be done to ensure that homeownership doesn’t become the preserve of the wealthy for generations to come.”

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Stamp Duty Surcharge Boosts Revenue for Government

Published On: May 25, 2016 at 9:20 am

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The 3% Stamp Duty surcharge for buy-to-let landlords and second homebuyers has boosted revenue for the Government, according to new data from HM Revenue & Customs (HMRC).

Due to the 1st April deadline, the highest ever Stamp Duty revenue for a single month was recorded last month.

Stamp Duty Surcharge Boosts Revenue for Government

Stamp Duty Surcharge Boosts Revenue for Government

The figures show that the Government generated almost £1.2 billion of Stamp Duty in April from a total of 173,430 property transactions in March, largely fuelled by high activity in the buy-to-let sector.

Nimesh Shah, a partner at London-based chartered accountants Blick Rothenberg, says it was “inevitable” that April would be an exceptional month for Stamp Duty revenue, as buy-to-let landlords rushed to beat the surcharge.

“Changes in the tax system lead to behavioural change, and the advance warning by the Government that Stamp Duty would increase for second purchases from 1st April 2016 is certainly evidence of opportunistic buyers wanting to beat the tax rise,” claims Shah.

This guide will help you understand how the tax change will affect you: https://www.justlandlords.co.uk/news/landlords-guide-stamp-duty-surcharge/

Although property transactions surged in March – ahead of the deadline – significantly fewer homes changed hands in April.

Between March and April, the number of property transactions dropped by a huge 45%, as landlords avoided paying the higher tax rate.

Assistant Manager at Blick Rothenberg, Paul Haywood-Schiefer, comments: “With the rush to get these transactions completed in April, it is inevitable there will be a slowdown in the market in the months ahead. Following this major upheaval in the tax, it will be interesting to see how property transactions and Stamp Duty receipts fare over the next few months, as the housing market relaxes itself. Those looking to purchase an additional property will be contemplating the increased Stamp Duty costs, while those with two properties may not want to sell, knowing they will have additional Stamp Duty to fund on replacing the second property.

“For now, the overall effect on the Treasury is positive, as Stamp Duty receipts for the previous 12 months, which hit £11 billion, have totalled almost as much as capital gains tax and inheritance tax put together, at £11.7 billion, and further demonstrates how the tax on property has boosted the Treasury revenues. It has also addressed an area in which the Government had expected to lose out.”

HomeOwners Alliance Reviews House Price Data for the Year

Published On: May 5, 2016 at 10:35 am

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HomeOwners Alliance Reviews House Price Data for the Year

HomeOwners Alliance Reviews House Price Data for the Year

As the major house price indices often report conflicting data, the HomeOwners Alliance has reviewed the figures to determine exactly what is happening in the property market.

Its May 2016 House Price Watch shows that house prices have risen by 0.7% in the past month and are up by 7.2% over the last year. These figures were calculated by finding the averages of house price growth data from other indices.

The average monthly change in house prices varies across the major indices, from a low of -0.5% reported by Land Registry to a high of 2.6% from Halifax.

It is believed that property sales surged between February and March, as buy-to-let landlords and second homebuyers rushed to beat the 1st April Stamp Duty deadline. On a monthly basis, there were 41.5% more property transactions, while there was an increase of 69.7% reported over the year.

The Council of Mortgage Lenders (CML) estimates that gross mortgage lending reached £25.7 billion in March, up by 43% on February and 59% on an annual basis. Again, it is believed that this was driven by a rush of landlords hoping to beat the 3% Stamp Duty surcharge.

Looking forward to the rest of the year, fewer transactions are expected. The HomeOwners Alliance reports that the distortion caused by the Stamp Duty change appears to be much larger than any previous tax revision.

The CML expects to see around 10,000 fewer mortgaged transactions each month in the second quarter of the year than would otherwise have been the case.

It is also forecast that house prices will slow in the near term, as uncertainty surrounds the forthcoming EU referendum and regional elections.

The Research Director of the HomeOwners Alliance, Katherine Binns, comments: “The Stamp Duty on second homes from 1st April 2016 has brought a rush of activity to the market ahead of the change. Looking forward, fewer transactions are expected later in the year to offset the early surge in the market. House prices, too, are likely to settle in the near term with the current climate of uncertainty around the European referendum and local elections.”

Buy-to-Let Landlords have Flooded London Property Market

Published On: April 28, 2016 at 9:10 am

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Three in five property purchases in prime London in the first quarter (Q1) of the year were made by buy-to-let landlords and second homebuyers. This has boosted the number of cash buyers in the capital, reports estate agent Marsh & Parsons.

Accounting for 36% of all property sales between January and March, buy-to-let investors were the most prolific type of buyer across prime London. This comes as no surprise, however, as many landlords rushed to complete on purchases ahead of the 1st April 3% Stamp Duty surcharge deadline.

The number of buy-to-let purchasers in the capital is up from 26% on the previous quarter, representing a sudden reversal of the recent trend of lower investor confidence. Investor share of the market was in slow decline last year, since peaking at 37% in Q4 2014.

Those buying a second home became the second most prominent type of buyer in prime London in Q1 2016. This buyer saw an even greater surge in market share over the quarter, with second homeowners accounting for almost a quarter (23%) of all Q1 property purchases, up from just 14% in Q4 2015.

Combined, buy-to-let landlords and second homebuyers accounted for three-fifths (59%) of all sales in prime London. In prime central London, this figure was even higher, at 76%.

Second homebuyers overtook landlords as the most common type of buyer in prime central London in Q1, accounting for 41% of all property purchases. Buy-to-let investors were not far behind, however, completing on 35% of all sales.

Buy-to-Let Landlords have Flooded London Property Market

Buy-to-Let Landlords have Flooded London Property Market

This rush has caused a much higher proportion of cash purchases in prime London. Two-fifths (40%) of sales were made by cash buyers in Q1, up from 34% in Q4 2015. In prime central parts of the capital, this rose to almost half (46%).

The CEO of Marsh & Parsons, David Brown, says: “Investors will always be the stalwarts of the prime London property market – it’s the golden goose of capital returns, and people are still clamouring for a slice of the action. But second homeowners really jumped to it this spring too, and were much more prominent in the market than we would typically expect.

“But this was by no means a typical quarter. Sales activity in the opening three months of this year has been exceptionally skewed by the additional layer of Stamp Duty for both buy-to-let and second home purchases. Naturally, the knee-jerk reaction among these groups has been to hurry through property purchases before the deadline, and make savings while they can.”

He adds: “Now that the ruckus has passed, we’ll see much more orderly transactions over the summer months, as the market rebalances towards first time buyers and other owner-occupiers, for whom it will just be business as usual.”

Over the past 12 months, buyer demand has jumped by 9% in prime London, taking the number of registered buyers for every available property to an average of 14.

However, levels of supply and demand are moving in vastly contrasting directions in the capital. In outer prime London, buyer demand has soared by almost a fifth (19%) since March last year, while in prime central London, it has dropped by 4%. Similarly, the supply of homes for sale in outer prime London has fallen by 12% annually, while supply is up by 11% in prime central locations.

Due to this chronic contrast in supply and demand, outer prime parts of London are experiencing the highest levels of competition in the capital, with 16 buyers registered per property. In hotspots such as Balham, this rises to 21.

This fierce competition has fuelled a significant surge in house prices in outer prime London, greatly surpassing the price growth recorded in other parts of the capital. In Balham, prices have risen by 7.2% over the last year, and by 3.4% in the last three months alone.

Brown concludes: “The market is brimful of buyers, and nowhere more so than the poplar addresses of outer prime London. There’s still a significant price premium to be paid for living in the central confines of our capital, and this has drawn certain geographical battle lines for the next generation, who are increasingly focusing their efforts in outer prime territories.

“For first time buyers and young professionals, these are the places where they can afford bigger properties that offer them room to grow, and for savvy investors, these are the places where prices still have room to grow too.”

Despite this latest research, there have been reports of the London property market running out of steam.

Homeowners Welcome Stamp Duty Surcharge for Landlords

Published On: April 22, 2016 at 9:44 am

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More than twice as many homeowners (47%) support the 3% Stamp Duty surcharge for buy-to-let landlords and second homebuyers than oppose it (18%), according to a recent survey.

The study, conducted by YouGov on behalf of HomeOwners Alliance and BLP Insurance, found that the change is seen to support first time buyers and owner-occupier properties.

Those in the South West, where there is a serious shortage of affordable homes, are most in favour of the higher tax rate, with six in ten (59%) supporting the change.

Homeowners Welcome Stamp Duty Surcharge for Landlords

Homeowners Welcome Stamp Duty Surcharge for Landlords

On 1st April, the Government introduced a 3% Stamp Duty surcharge for those purchasing buy-to-let properties and second homes. The change was initially met with opposition from many groups.

Supporters of the surcharge believe the measure will help create a level playing field between those buying homes to live in and those purchasing an investment property.

One respondent to the survey says: “The buy-to-let market is slowly destroying the overall housing market and making affordable properties less available for those wanting to own a home as their principal place of residence.”

Some have witnessed a shortage of homes available for first time buyers, and hope that the Stamp Duty change will make it harder for landlords to purchase similar properties.

Additionally, buy-to-let landlords have been blamed for pushing up house prices and pricing local residents out of the housing market.

Some also believe that those able to afford a second home or investment property should be able to afford to pay a higher rate of Stamp Duty.

Those who oppose the surcharge suggest that the measure could have unintended consequences, such as higher rent for private tenants. Landlords also feel that the Government is making another tax grab at the buy-to-let sector.

One respondent states: “I have been saving for some time (five years) to be able to afford to purchase an investment property. This change has now meant that it is not feasible for me to do so. It is unfair to penalise people who work hard and save.”

Stamp Duty reforms for all buyers, introduced in December 2014, were also well received, with one third saying the changes make buying their first home or moving up the property ladder more affordable.

Furthermore, concerns over Stamp Duty have subsided significantly. In March 2014, it was found that two-thirds of UK adults (64%) said Stamp Duty was a serious problem, while the latest survey shows that just half (52%) regard Stamp Duty as a serious issue.

The Chief Executive of HomeOwners Alliance, Paula Higgins, comments: “The British public believe that homes are for living in and not speculating with. The Stamp Duty surcharge might be bad for landlords, but it will allow more young people to realise their dream of owning the roof over their head. This is why we initially called for the tax system to differentiate between aspiring homeowners and property investors. However, we must see the money raised ploughed back into building more affordable housing.”