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Stamp duty increase comes into force

View profile for David Baybut
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House prices set for steady growth according to forecasters

From today (1 April 2016), anyone buying a home that is not their main residence will face a 3 per cent hike on Stamp Duty.

The surcharge applies to anyone buying a property with a value exceeding £40,000 as a buy-to-let-investment, second home or holiday home and could add thousands onto the cost of any transaction completed after the deadline.

For example, a property sold for £200,000 before 1 April would accrue £1,500 of stamp duty. From today, that figure will increase to £7,500 – a five-fold increase.

Currently, buyers pay no stamp duty on the first £125,000 of any transaction, then two per cent on transactions between £125,000 and £250,000 and five per cent from any transaction exceeding £250,000 and up to £500,000.

The changes were first announced by the chancellor, George Osborne, in November of last year, leading to a flurry of activity from those looking to buy a second property.

For landlords, estate agents and solicitors, the days and weeks leading up to the deadline have been some of the busiest in living memory, as parties rushed to complete property deals before the increase came into force.

But the true cost of the government’s new measures will fall on those investing in a buy-to-let property, which – aside from being a booming industry in its own right – has become a popular investment option for those looking to increase their pension pot or supplement their income.

As such, the new Stamp Duty surcharge stands to provide significant revenues for the treasury, capitalising on the increased number of private landlords investing in a second property or expanding their property portfolio. Many landlords see the measures as a ‘financial penalty’ on their business.

Landlords are facing a further squeeze under restrictions to mortgage tax relief, due to come into force next year, while the Bank of England announced this week that they aim to tighten restrictions around buy-to-let-lending. These changes will require lenders to consider the landlord’s wider finances, not simply their income from their existing rented properties.

According to the Association of Residential Letting Agents, nearly two-thirds of letting agents predict that the supply of buy-to-let properties will fall from 1 April 2016, while 60 of the organisation’s members believe that the cost will be passed on to tenants with an increase in rents.

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