In his Autumn Statement the Chancellor delivered two further blows to buy-to-let investors. What is he attacking now?
Buy-to-let attack. In the Summer Budget 2015 the Chancellor attacked buy-to-let investors by announcing that over a period of four years starting on 6 April 2017 tax relief at higher rates will be phased out for interest on loans used to purchase buy-to-let residential properties. And in his Autumn Statement he announced two further measures that will adversely affect buy-to-let investors.
3% stamp duty rise. From 1 April 2016 (not 6 April) there will be a 3% increase in stamp duty for buy-to-let residential properties and second homes over £40,000. The brief guidance so far issued by HMRC states that it will apply to both individuals and companies but it is looking at a possible exemption for companies owning more than 15 residential properties.
Note. The 3% rise is applied to all current stamp duty rates including the 0% band, so on a £200,000 property the stamp duty rises from £1,500 to £7,500 (£125,000 x 3% + £75,000 x 5%).
Tip. If you are looking to purchase a buy-to-let property imminently then you should aim to complete the purchase by 31 March 2016 to avoid the additional 3% stamp duty.
Capital gains tax payment deadline significantly reduced. From April 2019 any capital gains tax will need to be paid within 30 days of the disposal of residential property. This is a significant change for individual taxpayers who currently do not need to pay capital gains tax until 31 January following the end of the tax year in which the property is sold. As well as having a cash flow implication for property investors, it will be an extreme challenge for advisors to get the information from the client and complete the necessary tax computations within 30 days. It also remains to be seen how this will all fit with any relief for capital losses incurred in the tax year and the capital gains tax annual exemption.
Tip. There is now an even greater need to ensure that you keep accurate records of the original purchase costs of the property and any subsequent improvement costs.
From 1 April 2016 the stamp duty rates for buy-to-let investors will increase by 3% and from April 2019 capital gains tax on residential properties will need to be paid within 30 days of completion.