The Chancellor George Osborne announced in his Autumn Review this week that he will increase stamp duty for buyers of BTL properties and second homes by making them pay an extra 3% of the purchase price, compared to what they currently pay, starting in April 2016.
Osborne said he wanted to change 'from generation rent to generation buy' and was concerned that cash buyers and foreign investors would not lose anything financially from the relief cap of 20% on mortgage interest announced this summer. The higher stamp duty would raise an additional £1bn in tax and allow the housing budget to be doubled to £2bn per annum to finance
the building of 400,000 affordable homes. However, commercial property investors, with 15 or more properties, are expected to be exempt from the new stamp duty charges.
Before we jump on the 'BTL Armageddon' bandwagon though, let us first put this into context. Even with Savills predicting 'subdued' property price growth in the UK over the next five years (2016-2020), the firm still expects prices to rise by 17% during that time.
Were this to happen, a landlord would usually get back the extra 3% stamp duty payment within 12 months. When you sell your investment property you can also deduct the stamp duty payment from your capital gains tax bill so the real cost would eventually equate to less than 3%.