Chancellor George Osborne landed buy-to-let landlords a shock during the Autumn Statement by announcing a 3% stamp duty surcharge on property purchases from 1st April 2016.
The addition of a 3% extra charge for buy-to-let and second homes on all stamp duty bands above a £40,000 starting level will see some purchases taking on a much larger amount of stamp duty.
The bill for buying a £250,000 second home, for example, will rise from £2,500 to £10,000.
George Osborne said during his statement that:
“Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy. So I am introducing new rates of stamp duty that will be 3% higher on the purchase of additional properties like buy-to-lets and second homes.”
The worry amongst industry commentators is that the move could distort the housing market, with a rush of buy-to-let and second home purchases before the start of April. It was described as ‘catastrophic news for the private rental sector’ by David Cox, the head of the Association of Residential Letting Agents.
The Chancellor went on to say during his statement that:
“The new surcharge on stamp duty for landlords and those buying second homes will raise £1 billion for the Treasury by 2021, and we’ll reinvest some of that money in local communities in London and places like Cornwall which are being priced out of home ownership.”
The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property, given the role of this investment in supporting the government’s housing agenda. The government will consult on the policy detail, including on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.