From April 1st 2016 anyone buying buy-to-let property in the UK will have to pay an additional 3% stamp duty on top of the current standard rate. Where previously the higher rate started on properties over £125000 (2%), the new charge will apply to all purchases of buy-to-let or second homes over £40000. Profit margins for landlords will also be squeezed by greater taxes on profits – their maximum tax relief will fall by over half, from 45% down to 20%. Over all, a landlord buying and renting in 2017 will have a tax bill triple what it was in 2015.
As new stamp duty taxes reshape the buy-to-let landscape, what does it all mean for brokers?
Where investors would previously have bought multiple properties in the lower tax bracket, this shift might draw them away to buy fewer but more expensive properties in the hopes of making a more significant profit. On the other hand, with landlords who hold properties through limited companies not being subject to the income tax changes (and the Treasury consulting on the possibility of an exception from the Stamp Duty rises for corporate landlords holding 15 or more properties) we may be about to see a rush of landlords (aspiring and established) incorporating.
Will the combination of the two squeeze out the middle of the buy to let market? How long before a campaign for first-time buy to let buyers asks for exceptions and exemptions to keep the landlord industry alive?
At this point it’s too early to say for sure, but I’m certain the next year will be a very interesting time for brokers and the wider mortgage market. Let me know your thoughts in the Replies.
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