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It was revealed last November that the government increase of Stamp Duty Land Tax on Buy-to-Let properties will mean that anyone who completes the purchase of a second property after the 1st April 2016, will be subjected to higher stamp duty rates. Every stamp duty band will now have to pay an additional 3% in tax. If you are considering buying a property, our advice is to buy now and avoid these rate increases.

Value of PropertyStandard Stamp DutyApril 2016 second home/buy-to-let rate
Up to £125,0000%3%
£125,000 – £250,0002%5%
£250,001 – £925,0005%8%
£925,001 – £1.5m10%13%
Over £1.5m12%15%

Why has Stamp Duty changed for 2nd Homes?

The government wants to cool down the buy-to-let market which has rapidly expanded in recent years. In November it was revealed that buy-to-let mortgages had increased by 36% in just 12 months whereas lending to first-time buyers had risen by just 10%. It’s hoped that the changes will make it easier for families and first-time buyers to get onto the property market.

The Death of Buy-to-Let?

It’s certainly likely to slow the market down, but it may not kill it off altogether. A recent YouGov survey commissioned by the Council of Mortgage Lenders (CML) showed that 60% of landlords will take no action in light of the increases combined with the offsetting off mortgage interest against profits.

Only 13% said they are looking to sell their property, with 7% said they plan to sell all and 6% planning to sell some. A further 15% said they will slow down the rate at which they buy properties, with 8% saying they will stop buying additional properties completely. Another survey, this time by the Residential Landlords Association, suggest that as many as 20% of landlords in the UK will sell their rental properties.

The proof will be in the pudding when the changes come into force. Landlords may try to offset the negative financial impact by increasing rents, for example.

Gorvins Advice: Complete your purchase before 1st April

The changes will undoubtedly have a large impact. If you are thinking of investing in another property in the future, the wisest move would be to buy and complete before the 1st April deadline. This way if you bought, for example, another property worth £275,000 you will pay 5% (£3,750) in stamp duty before April 2016 and not 8% (£12,000) after. A significant difference.

To get your buy-to-let transaction on the move now give our residential property solicitors a call on 0343 507 5151 where we can give you an all-inclusive, no-obligation quote.