How will buy-to-let stamp duty changes affect you?

“Changes will level the playing field between landlords and residential buyers” says Treasury.

For years now the buy-to-let market has boomed. Soaring property prices, rising rental demand and rock bottom mortgage rates and combined to enable a growing number of landlords to earn ever-more lucrative returns. But, tax and stamp duty changes could spell trouble.

So what is happening?

Buy-to-let landlords and people buying second homes will soon have to pay more in stamp duty, the chancellor has announced.

From April 2016, those in England and Wales will have to pay a 3% surcharge on each stamp duty band.

stamp-duty-dates

So the tax on a £175,000 purchase jump six fold from £1,000 to £6,250 (see table below). For someone buying in London, say a two-bed flat for £400,000, the stamp duty rises from £10,000 to £22,000.

Currently, the rate for stamp duty is 0% on properties up to £125,000, then 2% on any sums over and above £125,000 to £250,000. Properties sold at £250,000 to £925,000 pay 5%, then it is 10% above that. These rates remain the same for standard residential buyers – but 3% extra will be added if the property is to be used as a buy-to-let or second home.

If you were to re-mortgage your current property on to a let to buy mortgage then buy a new residential property, you will be taxed on the same basis as a buy to let / second home.

table

What to do next?

If you were considering buying a buy to let property you need to move quickly to avoid paying the 3% surcharge, all new purchases need to be completed by the 31st March 2016.

Here at Homeline Mortgages we have the team in place to assist you with your buy-to-let mortgages and can act very quickly to push through your purchase and try and beat the deadline.

If you need any advice please do not hesitate to call us on 01202 937444