Tax rise for buy-to-let and second home buyers

By Paul Emery

The Chancellor has announced an unexpected tax rise for buy-to-let and second home buyers – an additional 3% stamp duty on new purchases to raise £3.8bn over the next five years. Corporate and fund investors are likely to be exempt from the new increase. It follows on from the recent restriction on mortgage interest tax relief for buy-to-let landlords.

Taken together, these recent measures seem to show the Chancellor encouraging a shift in the residential rental sector away from amateur landlords.

The government does not intend to make residential property less attractive for institutional investors and will consult on exemptions. Investors will be keen for clarification given the short amount of time until the 1st April 2016 implementation. It remains to be seen how ‘second homes’ will be defined, particularly with regards to overseas buyers.

Stamp duty is a tax on capital; buy-to-let and second home owners will now need more funds to enter the market as a bigger chunk of their deposit will be spent on stamp duty.