In an attempt to rid a £4billion tax deficit, second homeowners will now face a big, fat, ugly 3% increase on their stamp duty bills. Thanks to George Osborne, second-home buyers of holiday or rental properties will now have to endure even more ferocious tax bands.
Second-home buyers of a property worth £500,000 will now think twice as of April 2016, now that their stamp duty tax will double to £30,000. This has the potential to put off buyers investing in property for their pensions, due to the rate of return from annuities being low.
To add insult to injury, large firms owning 15 properties or more are not expected to pay the higher charge.
Mr. Osborne proclaimed that the extra money would be used to help first-time buyers and pay for more affordable housing, but he will forgive the nation if that statement is received with an air of skepticism.
At the moment the stamp duty rates are as follows:
- On the first £125,000 of a property’s price buyers will pay no stamp duty.
- From there buyers pay 2% on the amount up to £250,000.
- 5% between £250,000 and £925,000.
- 10% up to £1.5million and 12% on anything above that.
However, once the reforms come in, in April 2016, each band will increase by an additional 3%.
What does this mean to potential new landlords?
The change in the pension scheme last April has influenced many savers to invest in a second-home for their pension. But this growth raised concerns by The Government, as last September the Bank of England forecasted that a rise in buy to let investment would worsen the housing crisis- with borrowers taking out a lager loan during a boom and usually sell more quickly during as bust.
Wealthier landlords have been hit hardest as the changes that have followed the summer announcement have put restrictions on tax relief claimed on their mortgages, to the basic rate of income tax at 20%.
With a lack of mortgage tax relief and an extra £12,000 on stamp duty, it is almost certain to have an impact on either the tenant, the market, or both.