New second property stamp duty tax

The 2015 Autumn Budget let us all know in no uncertain terms that the current Government is fully prepared to use tax as a weapon of political interference in the property market, with outrageous taxes on second properties.

We know that we have x number of people in the UK and x number of houses available for people to purchase, however the legislation could well have serious unforeseen consequences, particularly in the extremely important rental market.

In the Autumn 2015 Budget, George Osbourne announced that there would be an additional 3% SDLT (Stamp Duty Land Tax) charge on the entire purchase price of second properties, in addition to the standard marginal rate charge. This additional charge came into force in April 2016. If you visit the HMRC website there are around 43 examples of when an “innocent victim” would have to pay the increased tax.

If an owner occupier sells up and purchases again, but the completion dates don’t match…… they will be caught by the additional SDLT charge. The most common example is the purchaser who has to complete on their purchase before the sale on their existing home has completed. Yes they may have exchanged contracts……but that’s not good enough. They pay the extra tax, however it can be reclaimed within 18 months.

Another example is the quite common “Let to buy” situation where a home owner purchases a new home, but retains their existing home as a buy to let rental property. These situations are caught by the new SDLT tax hike.

Properties purchases as refurbishments, Buy to Let properties, holiday lets and second homes are all caught by the new tax.

If, however, a person owns a home, plus say 5 buy to let rental properties, sells their home and buys another with matching completion dates, HMRC views this as replacing one main residence with another, so this situation will not be caught and no additional SDLT will be payable.

This votes winning (?) imperative is to increase housing supply for the residential housing market…… or so they say……….. However, since the Thatcher Government dreamt up “ Right to Buy” and the majority of council houses were sold off cheaply to the occupants, those people that are not fortunate enough to be able to purchase their own homes have been housed by private landlords.

The Government seems to be anti-landlord, the very landlords that provide houses for those who are not in a position to purchase………… So, not only have they brought in this SDLT tax hike which will affect new BTL purchases, additionally, HMRC have announced plans to restrict the amount of interest that a BTL landlord can offset against rent, so increasing their tax bill.

“The Government says it wants to increase the supply of houses available to the residential market, but the consequence could well be catastrophic for the economy if Landlords pull out of the market and there is no accommodation available to the less fortunate” said Norman Phillips Director of Network Property Management Ltd.

Mr Phillips went on to say “ this could actually be the ultimate vote loser for this Government and play right into the oppositions hands”