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The world of conveyancing has never been so busy. There was frenzied activity to push house sales through before the new stamp duty land tax rules come into effect for buy-to-let and second homes today.
What’s the rush?
In his Autumn Statement on 25th November the Chancellor announced that from April 2016 people buying an additional home will have to pay an extra 3% stamp duty land tax surcharge when they complete the purchase. The additional 3% applies across all the current rates. So for instance someone buying a house for £250,000 currently pays £2,500 tax (1%). From April, if they are buying the property as a second home, or to let, they will pay £10,000 tax (4%).
These changes follow an updated tax system for all home buyers at the end of 2014. Under this system, stamp duty land tax is now payable in slices. There is no tax payable on the first £125,000 of the purchase price, a 2 per cent charge on the next £125,000, a 5 per cent charge on the next £675,000 and a 10 per cent charge on the next £575,000. The top rate of stamp duty (12 per cent) applies to the slice of consideration above £1.5 million.
The recent move represents a shift in policy away from supporting prospective landlords to buy houses to let out to families who cannot afford to buy, towards relieving the pressure on the market which is currently forcing up prices. Last year statistics emerged showing home ownership in UK has declined to a level lower than that in France for the first time.
The previous reductions in stamp duty land tax for buyers of homes at the lower end of the housing market came as good news for those seeking to buy their first home. Sadly though some of the fundamental issue affecting the market are not being tackled - a shortage of affordable homes which limits the market, and restrictive lending rules that prohibit many people from getting the mortgage they need.
Commentators and property experts are warning that the new measures will stifle property investment and lead to shortages in the rental market. Furthermore, until the supply of affordable homes is re-stocked it is questionable whether penalising landlords will actually be the answer to the current needs.
Another note for your diary, the Chancellor is also restricting income tax relief on rent income from April 2017.
For more information speak to one of our conveyancing team.