George Osborne has just announced an impending hike in the already disliked Stamp Duty Land Tax. For Buy-to-Let properties and second homes purchased after April 2016, there will be an increase of 3%. Even if you are not thinking about purchasing a second home or start investing in property to rent, this will undoubtedly have an affect the property market and you. Here’s what we have gathered so far;

There is going to be a stampede to purchase and complete on properties before April 2016. In fact The Institute for Fiscal Studies condemned the move as “disproportionate” said that there will be a “rush” for buy-to-let properties before the new tax comes into force. The cost increase is large. For instance, if you were to by an investment property for £275,000, the stamp duty would currently cost £3750.00 at 1.36%. Following the changes this will get hiked up closer to £10,000. In the (very) short term, we predict a slight rise in property prices as owners realise the increase in demand.

Are you renting?

For those currently renting, we predict that landlords will simply pass on the additional costs to their tenants, therefore seeing a rise in rent. While some analysts look at this as a return to times of higher yields for landlords, in fact, this cost is simply transferred to the government and yield will most likely remain at the average of 2.5-3%.

Are you a homeowner?

Unless you are hoping to purchase a second home or sell yours after April 2016, this main effect will be a potential reduction in your house price. Stuart Adams, a Senior Research Economist at the IFS, said: “Properties will be worth less because potential landlords and potential homeowners won’t be willing to pay as much for them. If property developers don’t feel they’re going to get as much for them, then there’s less incentive to develop it. Thinking about the longer-term effect, at the margin the policy is likely to raise owner-occupation rates. It will make rental properties and second homes more expensive and therefore discourage the purchase of properties for that purpose. It may well also reduce house prices and might also increase rents if it feeds through.”

Investing in property?

If you are gearing up to start investing in the property market, you have still got time to buy before the changes come into place. Even if you do purchase after the changes, it is not going to be an amount that makes purchasing impossible. As we have already shown, you will most likely be able to just pass on the additional costs to your tenants, but it is undoubtedly going to reduce the yield you can achieve in the long term.

Is there any way round it?

As Benjamin Franklin said ‘In this world nothing can be said to be certain, except death and taxes.’ However, there is always relief set up to help people. For instance, landlords could live in their properties for a short period before letting them out, or that husbands and wives could split ownership of their properties. Gemma Tetlow, Programme director at the IFS, confirmed: “There are a number of ways you can get round this whole policy. What about the case where I buy a property, live in it for a little while but then choose to let it out.”
It is also interesting that this increase appears to target individuals, rather than property investment companies that have certain structures in place.. Naturally you can also take advantage of this by creating a company for your investment, although the cost of doing so, means it is probably not worth it if you are only purchasing a small number of properties. James Kerman, Director of Winkworth North Kensington said ‘It is a direct attack on easy targets; individuals who can take advantage of current low interest rates, and suddenly they see a tax on this; a pre-tax almost.’

Table of increase on purchase:

Up to £125,000 0% 3%
£125 – £250,000 2% 5%
£250 – £925,000 5% 8%
£925 – £1.5m 10% 13%
over £1.5m 12% 15%

In other news The Help to Buy (equity loan) scheme in England will also be extended to 2021, one year longer than planned.


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