Taylor Scott International News
The extra 3% stamp duty tax being levied on buy to let and second home buyers in April 2016 means that it may no longer be financially viable for new entrants to the lower end of the private landlord market, it is claimed. And the new tax band will have a disproportionate impact on pensioners looking to generate revenue in retirement, according to Chestertons, one of London's largest estate agents. The announcement of the additional levy on second homes and buy to let purchases came as a surprise announcement in the Chancellor's Autumn Statement, and initially caused some confusion across the industry as pundits disagreed on how the additional 3% would be applied. Chestertons has now calculated that the extra duty will hit the lower end of the market more heavily in terms of a percentage increase than it will the higher end. A buy to let property acquired for £150,000 attracts stamp duty of £500, but under the new regime it rises to £5,000, a tenfold increase. By comparison, an investor buying a property for £1 million currently pays £43,750 in stamp duty, while the new rate will be £73,750, less than double the original duty, although of course a larger amount in cash terms. ‘The Chancellor claimed that this change to stamp duty would prevent wealthy investors and overseas buyers from pricing first time buyers out of the market, but as usual the devil's in the detail,’ said Nick Barnes, head of research at Chestertons. ‘What we can now see is that this change is likely to completely deter many first time landlords from getting into the private rental market in the first place, including pensioners looking to wisely reinvest their precious pension pot,’ he pointed out. ‘ The obvious effect of this will be that there may well be a significant number of smaller landlords deterred from entering the sector altogether. Those who remain will have their margins slashed and, on top of the increasing regulatory burden and the planned reduction in mortgage interest relief, they may have to raise the rent in order to make the numbers stack up. Either way, the already highly competitive private rental market is about to get a whole lot more so,’ he added. According to Robert Bartlett, chief executive officer of Chestertons, the industry had hoped that the Chancellor might have announced stamp duty change that would have helped the current negative impact on sales above £1 million. ‘We'd hoped he might consider capping rates, or reducing them by 3%, so you can imagine the dismay when this extra surcharge was announced. The buy to let sector has become an essential part of the UK housing landscape and we urge the Chancellor to think clearly around the rules for when this is being introduced,’ he said. He pointed out that a number of key questions still need to be answered, for example whether a buy to let investor who has contracted… Taylor Scott International
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