Tag Archives: government
Details of extra tax on UK buy to let and second homes unlikely before mid-March
The final details of how the extra stamp duty on buy to let and second home purchases will work will not be known until a couple of weeks before the new tax rate comes into effect in April this year. The government’s consultation period on the proposal for a 3% tax on these kind of property transactions runs until 01 February and officials will then consider the responses and are expected to confirm the final details on the annual Budget announcement on 16 March. The proposal is that the extra rate will apply to most purchases of additional residential properties where, at the end of the day of the sale, individual buyers own two or more residential properties and are not replacing their main residence. The higher rates will also generally apply to purchases of residential property by companies. It would seem that the 3% rate will not apply if at the end of the day of the sale an individual owns only one residential property, irrespective of the intended use of that property. However if following the transaction the individual owns two or more residential properties, the applicability of the additional rate will depend on whether the purchaser is replacing their main residence. Liam Bailey, global head of residential research at real estate firm Knight Frank, has pointed out that while the consultation assumes that most people will buy a new main residence on the same day as they sell their previous one, there will be an allowance for purchasers to have up to 18 months to replace a main residence following an earlier sale. Also where an individual sells their previous main residence after purchasing a new main residence, a refund of the higher rate could be claimed with the window for this refund limited to 18 months after the purchase of the new residence, he explained. He also said that it would appear that the location of additional properties will be global, so the ownership of a property in France for example, will be relevant. Also, the new rate will apply if the purchase is completed on or after 01 April 2016. However, if contracts were exchanged on or before 25 November 2015 but not completed until on or after 1 April 2016, the higher rate will not apply. The details will be important as there are a number of scenarios that could play out, for example parents buying a property for their children, joint purchases between friends and partnerships. Stephen Barratt, private client tax director at accountants and business advisers James Cowper Kreston, believes that the proposed legislation will create uncertainty, introduce many anomalies and take a long time to fully bed down. 'The fact that the new rules are intended to apply to completions on or after 01 April 2016 will mean that many purchasers will be exchanging contracts now without knowing what the final rules will be. This will create uncertainty,' he warned. 'The additional 3% rate is intended… Continue reading
Conveyancers set for a year of change ahead in UK home buying industry
The outlook for conveyancers in the UK is looking like one of change with extra stamp duty and high demand set to make 2016 a buoyant year for the industry, according to the latest sentiment tracker report. Some 27% of conveyancers believe transaction levels will increase by up to 20% this year, according to the report from Searchflow. It also says that with the UK Government encouraging first time buyers to the market and pledging to build new homes there will be change in the industry. The conveyancing industry is very likely to see a rush to complete property purchases prior to April when the extra stamp duty on buy to let and second home purchases becomes active. But according to Maud Rousseau, the firm’s group marketing and communications director this is likely to settle later in the year. ‘If rents remain high and housing stock is still in short supply, buy to let will remain a profitable investment for many. The market will continue to be boosted by new homes,’ she added. She also pointed out that last year saw a record level of new homes being built, up 25% year on year and reaching the highest annual increase in a generation. This trend is set to continue as the Government continues to roll out planning reforms to help increase housing supply. Technology is also set to have an impact. ‘With the advancement of agile technology and big data analytics, search companies are seizing upon the opportunities to drive through major changes. Data and technology providers are working together to create a one stop shop to not only streamline the process but help improve risk management,’ said Rousseau. ‘The trend for transparency within the conveyancing sector will continue to drive the delivery of new product offerings tailored for the homebuyers. These products will enable conveyancers to provide their customers with an improved service, whilst also benefiting from reducing their time required to update clients,’ she explained. The impact of online estate agents is set to be a major topic of debate this year is another issue highlighted in the report and it says that the conveyancing industry needs to be prepared to adapt quickly if online estate agents achieve their ambition of being ‘highly disruptive in the world of estate agency’. This year, there are a number of planned consultations that could have a very significant impact on the conveyancing sector. They included the Government’s consultation on the privatisation of the Land Registry will be closely monitored. And in advance of the review of Legal Services Act which is scheduled to be reviewed during this parliament, the Government has announced its consultation on alternative business models entering into the legal sector. The Government claims that it wants to ensure that innovative businesses are able to enter the market, providing greater choice for consumers. The Solicitors Regulation Authority (SRA)… Continue reading
Surge in demand for buy to let funding via limited companies from UK investors
The decision by the UK government to charge an extra 3% in stamp duty on but to let property buyers from April this year has led to a sharp increase in demand for limited company lending. New research shows that property investors looking for finance using a limited company has increased and at the same time the number of buy to let lenders offering finance to limited companies has also risen. The latest index from Mortgage for Businesses, covering the second half of 2015 shows that new applications for limited company buy to let mortgages had dipped to 15% of all buy to let applications in October but, then, almost immediately started to rise sharply, spurred on by the stamp duty surcharge announcement. By December, new limited company buy to let applications accounted for just over 38% of all buy to let applications. Completions for limited company buy to let mortgages accounted for nearly 22% of all buy to let completions in October, up from nearly 17% the previous month and this increased to 24% in December. ‘The increase in limited company buy to let activity is to be expected since the proposed restrictions to buy to let mortgage interest relief for individuals paying the higher tax rate were announced by the government in the Summer Budget,’ said David Whittaker, managing director at Mortgages for Business. ‘Operating portfolios via corporate structures is expected to be more tax efficient, particularly for higher tax rate-paying individuals, including individuals where the new tax regime will tip them into the higher tax bracket where previously they had remained below it,’ he explained. ‘The stamp duty surcharge has also had a direct impact on activity with investors trying to get purchases completed before 31 March 2016, particularly as the actual rules where the surcharge will apply will not be confirmed until 16 March 2016,’ he added. The index also shows that almost a third of buy to let lenders offered products to limited companies in the second half of the year, up from 23% in the first half of 2015. However, by the end of December this figure had risen to 36%. The number of products for limited company applicants increased by nearly 50% to an average of 147 in the second half of 2015, up from 99 in the first half of the year. ‘It’s good to see that the results continue to disprove the theory that there are insufficient products available to limited companies. It’s also interesting that pricing has come down, if only marginally. I wouldn’t be at all surprised if rates for limited companies reduced further in the coming months but I doubt we’ll see huge falls,’ said Whittaker. In December 2015 products for limited companies were, on average 0.7% points more costly than the market as a whole, a marginal reduction compared to July when it was 0.8%. The average limited company rate in December was 4.4%, down from 5.4% in July. Across… Continue reading
