Buy to let tax changes to hurt UK buyers more than foreign investors

Chancellor George Osborne’s buy to let tax proposals are set to hit domestic buyers far more than international investors, according to a leading investment consultant. 

Naomi Heaton of London Central Portfolio says average stamp duty and tax payments by buy to let investors in the regions will now, on average, jump to 2.5 times their previous levels. 

“Currently, In Manchester, for example, no tax is payable on the average buy to let (£102,714). From April, however, it will be at the same percentage level as that paid on a £500,000 property just a year ago. And in an area where long term annual growth has averaged just four per cent, equating to only 21 per cent over the next five years, the new tax will significantly eat into profits” she says. 

Alongside this, reductions in mortgage interest relief for higher rate tax payers will be most keenly felt by private landlords based in the UK. Heaton says the impact is far less for international buyers, whose main source of income is not derived domestically and who are, therefore, likely to be lower rate tax payers.

“The motive for the new taxation on private landlords is not purely economic but part of a UK government initiative. Whilst it recognises the importance of the private rental sector in maintaining the UK’s position as an international business hub and a provider of domestic housing, it is seeking to discourage private landlords and institutionalise the sector” says Heaton. 

“As part of this new government strategy, it has exempted large scale property investments from the new additional rate Stamp Duty. This includes substantial property funds which are also unaffected by the new rules restricting mortgage tax relief.”