‘Catastrophic’ stamp duty hike will hit rental market
LANDLORDS and those looking to buy a second home were dealt a hefty double blow last week when George Osborne said stamp duty costs on new purchases would leap from next April.
Also, tax due on gains when a second home or buy-to-let property is sold will have to be paid more quickly. These measures are in addition to new restrictions on tax relief for landlords from April 2017.
Anyone thinking of buying a second home should act fast if they want to miss the hike in stamp duty.
The additional rate of three per cent on top of the normal stamp duty charges will apply from April 1 next year.
For a house up to £125,000 stamp duty is normally zero but now a second home buyer will pay 3 per cent on the property price.
According to financial company Old Mutual Wealth, this means a buyer of a £150,000 second home will pay £5,000 in tax rather than £500 today. On a £200,000 house it will be £7,500 compared with £1,500 at present and on a £300,000 house it will be £14,000 rather than the current £5,000. The arrangement will not apply in Scotland.
From April 2019, any capital gains tax owed from the sale of a second home must be paid within 30 days of the sale rather than the current position of paying between ten and 22 months after the property is sold.
David Cox, managing director of the Association of Residential Letting Agents, says the stamp duty surcharge is ‘catastrophic news’ for the private rental sector.
He adds: ‘Increasing tax for landlords will push up rents and reduce property standards for tenants.’
He predicts landlords will pass on the increased stamp duty costs to tenants, who will see less spent on maintaining their property and also pay higher rents.
Buyers are still awaiting details on how offplan purchases will be affected by the changes – and homes bought for children.
Experts predict a panic rush by second home buyers to beat the deadline – potentially forcing prices up in the short term.
David Hollingworth, of mortgage broker London & Country, says: ‘Buyers who are wanting to complete a purchase before April will need to get their skates on.’