Another blow for buy-to-let investors

THE Chancellor today announced that those purchasing properties for buy-to-let or as holiday homes will have to pay a penalty – stamp duty at a rate that is 3% higher than a residential purchase.

It’s another blow for those who see buy-to-let as an alternative investment vehicle given the historically low levels of interest rates and it follows his announcement on mortgage interest relief in the July Budget.

Chancellor George Osborne said: “More and more homes are being bought as buy-to-lets or second homes. Many of them are cash purchases that aren’t affected by the restrictions I introduced in the Budget on mortgage interest relief; and many of them are bought by those who aren’t resident in this country.

“Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy.”

The change will be introduced from April next year and the extra stamp duty will raise almost a billion pounds by 2021.

Osborne added that some of the money raised would be reinvested in local communities in London and “places like Cornwall” which he said are being priced out of home ownership.

Rebecca Durrant, tax partner in the Manchester office at Crowe Clark Whitehill said: “This is another policy that will drive down the yields for people who own a buy-to-let investment. It may have the effect of making renting more difficult as rents could possibly increase as a result.”

Lee Blackshaw, head of private client tax services at the Manchester office of Smith & Williamson the accountancy and investment management group, said the reforms “will be a further nail in the coffin of the buy-to-let market.”

He said: “These measures are in addition to the finance cost relief restrictions announced in the Summer Budget, which will make highly geared property businesses unviable. Landlords who are not already in the process of reviewing their portfolios will need to do so before long.”