In recent years, public pressure has forced the Government to tilt the property market towards homeowners and away from property investors. In the summer Budget, the Chancellor announced what some termed a “bombshell” policy whereby income tax relief on buy-to-let finance costs would be limited to the basic rate of tax only. Fierce debate followed from interested parties.
Today, the Chancellor dealt another blow to property investors when he announced that from 1 April 2016, individuals purchasing a second property such as a buy-to-let property or a second home, will be hit with higher rates of Stamp Duty Land Tax (SDLT). The rates are said to be three percentage points above the current SDLT rates but will apply only to residential properties with a sale price in excess of £40,000 and will not apply to the purchase of caravans, mobile homes or houseboats. Significantly, this measure will also not apply to property purchases by corporate entities and funds making “significant investments” in residential property. A “significant investment” is considered, for now, to mean holding more than 15 residential properties.
The merits of holding residential properties outside a corporate structure will, once again, be brought into focus, although tax advisors will be acutely aware that the considerations surrounding incorporation are far more wide-ranging. However, the exemption for corporates and funds is not set in stone and a consultation will follow to determine whether it is appropriate when considered alongside the Government’s housing agenda.
Another aspect of the SDLT focused consultation is a proposed reduction in the period for filing an SDLT return from the current 30 days to 14 days. This change, if implemented, will not take effect until 2017 at the earliest.