Buy To Let Stamp Duty has little impact on market – claim

Buy To Let Stamp Duty has little impact on market – claim


Todays other news

A conveyancing firm claims the government attempts to curtail buy to let and second home purchases by increasing stamp duty for additional properties, have had minimal impact on the market. 

LCF Residential says all of the property transactions it was working on during the Budget, that were being bought by second home buyers and investors, have gone ahead as planned.

This follows Chancellor Rachel Reeves using October’s Budget to hike up the stamp duty surcharge for second properties from 3% to 5% overnight. 

Julie Davis, head of LCF Residential, says: “People buying second homes or investment properties were already subject to a higher rate of stamp duty prior to the Budget and adding an additional 2% onto this doesn’t appear to have made any difference to the market so far.  

“Out of the dozens of transactions we were working on, that were being bought by buy-to-let investors and second home buyers, each one has still gone ahead as planned. 

“The Treasury’s aim with these changes was to give first-time buyers and those looking to move home an advantage over second home buyers and landlords. However, it remains to be seen whether these changes are enough to significantly alter that market.”

Over the weekend HMRC produced figures showing that residential property receipts that attracted stamp duty jumped 16% in the last three months of last year compared to the previous quarter. These receipts were 27% higher than the same period a year ago. 

HMRC points out that residential property transactions that attracted stamp duty rose 9% in the fourth quarter compared to the previous quarter.

And at the same time business consultancy Hargreaves Lansdown issued a gloomy analysis of the costs associated with property investment, and insisted that stamp duty was one of many disincentives for buy to let.

Sarah Coles, head of personal finance at Hargreaves Lansdown: “Stamp duty clobbered buyers as they rushed to complete sales before any potential bad news in the autumn Budget. Property investors got bad news by the bucketload during the announcement, which means stamp duty bills are only going to get bigger.”

Coles says that someone investing in a second property costing £249,000 before the Budget would pay £7,460 less in stamp duty than someone investing on April 1 this year, once stamp duty thresholds revert to previous levels. 

The more expensive the property, the more the additional cost – so someone investing in a second property costing £500,000 would pay an extra £12,500. 

Coles continues: “And that’s just the start of it. When an investor rents out the property, they also pay income tax on rental income. You haven’t been able to claim full tax relief on your mortgage interest since 2017, and because the income tax thresholds have been frozen since 2021, it means more people paying higher rates and facing bigger bills.

“Then when you come to sell, there’s capital gains tax to worry about. The annual allowance has dropped to just £3,000, and the rate is 18% for basic rate taxpayers and 24% for higher-rate taxpayers – and if the gain pushes you over a threshold you’ll pay some of this tax at a higher rate.

“And there’s no way to mitigate this.”

Meanwhile Julie Davis of LCF Residential says it’s worth remembering that from April 1, stamp duty rates are changing for homebuyers, when the temporary increases to the thresholds that were put in place in 2022, come to an end. 

Homebuyers don’t currently pay stamp duty on properties below £250,000, but this will drop to the previous level of £125,000 in April. In addition, the threshold at which first-time buyers pay stamp duty will fall to £300,000 from £425,000 and although this might not affect too many first-time buyers in the North, it will have an impact in other parts of the country.

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