2015 Autumn Statement update

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26 Nov 2015

Autumn Statement update: More new builds and 3% stamp duty

Author: Peter Fuller

In the 2015 Autumn Statement, Chancellor George Osborne promised to spend nearly £7bn to address the shortage of new homes, and announced a 3% surcharge on each stamp duty band where the property is being purchased as a buy-to-let investment or as a second home.

The chancellor outlined plans to pay developers £2.3bn to build 200,000 starter homes for first-time buyers, who will receive a 20% discount on prices up to £450,000 in London and £250,000 elsewhere.

Stamp duty surcharge

The stamp duty surcharge, coming into play from April 2016, will increase each band by 3%. That means that for properties worth between £125,000 and £250,000, where the stamp duty is 2%, buy-to-let landlords will pay 5%, and for properties worth more than £250,000 and up to £925,000, where the stamp duty is 5%, buy-to-let landlords will pay 8%.

Find out how much stamp duty you will have to pay if you complete a purchase on a second home or buy-to-let investment before or after 1st April 2016 with Romans' Stamp Duty Calculator.

The average cost of a flat in Reading is £200,763 (Rightmove), so from April 2016 buy-to-let landlords will have to pay stamp duty of £7,538.15, which is £6,022.89 more than they would currently. However, commercial property investors, with more than 15 properties, are expected to be exempt from the new charges.

surge in interest from investors

“The new stamp duty surcharges for buy-to-let landlords were completely unexpected and it is a shock for much of the industry” comments Peter Fuller, Managing Director of Romans Lettings.

“This may not be positive news for landlords, but it’s important to note that buy-to-let is a long-term investment and in that sense it can still be very lucrative. Over the next 12 months I’m predicting rental yield increases of at least 5% and house price rises of 5-10% in this area, with house price rises of approximately 25% in the next five years.

“With the historical capital growth and further predicted property price rises over the next few years property is still a great long-term investment.

“Of course, with the new stamp duty surcharge coming into play from next April we are encouraging landlords to expand their portfolios sooner rather than later in order to avoid the extra charges. In fact, as of this morning we have already experienced a surge in interest from buy-to-let investors.”

Search the latest investment properties and find out more about Romans’ Investors’ Choice Service

 

Stamp duty chart

It's important to note that if you are purchasing a property and exchanged contracts before the 25th of November  – when the Autumn Statement was delivered – you will not have to pay the higher tax rate. This is true even if you complete after the 1st of April 2016. 

New Capital Gains Tax rules

Buy-to-let landlords will also need to take note of the change to Capital Gains Tax rules. From April 2019, they will have to pay any Capital Gains Tax due within 30 days of selling a property, rather than waiting till the end of the tax year, as at present.

Landlords are still due to get a lower rate of tax relief on mortgage payments; in his summer Budget, the chancellor said that landlords would only receive the basic rate of tax relief - 20% - on mortgage payments, a change being phased in from 2017.

“Despite the new tax relief revision and stamp duty surcharge, the UK, and particularly the south east, remains an extremely attractive option for property investors, thanks to the strong capital growth predicted over the next five years, demand from tenants and lack of supply driving rental prices up, as well as the on-going low buy-to-let mortgage rates available” adds Peter.

If you’re interested in purchasing a buy-to-let property and you’d like to organise your finances book an appointment with a qualified mortgage adviser from Romans Mortgage Services on 0118 3219 536, or visit: romans.co.uk/mortgages.

Extended Help to Buy scheme

The chancellor also announced an extended Help to Buy (equity loan) scheme in England to 2021, one year longer than planned, and more money for the Starter Homes programme.

In total, the government will put an extra £6.9bn into housing, which includes an extra £2.3bn in loans for the government's starter homes programme, and £4bn lent to housing associations and local authorities to build more homes for shared ownership. Another £200m will be used to build homes for rent, which will allow tenants to save for a deposit.

To find out more about the changes announced in the Autumn Statement and for expert property investment advice talk to the team at your local Romans’ branch.

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