Chancellor George Osborne wants to add a 3% surcharge to stamp duty for property investors purchasing second homes or homes to rent out.
The measure is aimed at catching investors who buy homes for cash and are outside the net for changes in mortgage interest relief starting in April 2016.
“More homes are bought as buy-to-lets or second homes,” said Osborne in his Autumn Statement 2015 speech to MPs in Parliament.
“Many are cash purchases that unaffected by the restrictions I introduced 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.
So I am introducing new rates of Stamp Duty that will be 3% higher on the purchase of additional properties like buy-to-lets and second homes.”
The new rates will apply to home purchases of more than £40,000 – but not caravans, houseboats or mobile homes.
A consultation is on the way with more details, including an invitation to comment on whether companies and institutions owning less than 15 homes should be exempt from the new rules.
Osborne says the new tax hike will take effect from April 2016.
He hopes to raise £1 billion from the tax by 2021. Some of the money will be reinvested in building affordable homes for locals in areas such as Cornwall, where property prices are driven up by second home owners.
The likely stamp duty rates will be:
|Property purchase price||Residential rate||Investment rate|
|Up to £40,000||0%||0%|
|£40,001 to £125,000||0%||3%|
|£125,001 to £250,000||2%||5%|
|£250,001 to £925,000||5%||8%|
|£925,001 to £1.5 million||10%||13%|
|Over £1.5 million||12%||15%|
Osborne’s spending review and autumn statement contained little more that affects property investors.
Two more consultations are on the way about how stamp duty and capital gains tax are collected.
From 2017, the government proposes to shorten the time allowed for payment of stamp duty from 30 days to 14 days.
Property investors can also expect a separate consultation on the payment of capital gains tax on disposal of a residential property.
The government wants any tax due paid within 30 days from April 2019.
Sales of homes where gains are covered by principle residence relief are not affected. The change brings UK onshore CGT rules in line with those for non-residents introduced in April 2015.