Tax Changes Affecting Buy to Let Investors

Back in August we reported on how the landlord fair wear and tear allowance was to be scrapped as of April this year, and how tax relief on buy to let mortgages was also set to be decreased down to the basic rate by 2019.

Then there was the news that landlords would face a change to the way tax is paid when a buy-to-let property is sold. From April 2019 capital gains tax will be due within 30 days of selling a property, rather than at the end of the tax year.

Stamp Duty Changes 2016

Now we hear that stamp duty changes will also be introduced in April this year, applying to anyone purchasing additional residential property.

Buy a second home or investment property after 1 April and you will be paying an extra 3 per cent on properties over £40,000. So on a currently zero-rated property costing from £40,000.01 to £125,000 you will pay 3 per cent on the full purchase price; on a property from £125,000.01 to £250,000 it will be 5 per cent rather than the current 2 per cent; from £250,000.01 to £925,000 the rate will be 8 per cent and up to £1.5 million 13 per cent. Over this amount, stamp duty will be charged at 15 per cent.

Investors with 15 or more properties, however, will not have to pay the additional percentage, and there may be further potential exemptions for larger and corporate investors.

However, there could be a glimmer of light in the shape of offsetting purchase costs against any eventual capital gains tax – including stamp duty. So whilst there will be a large bill to pay on purchase, if the property is eventually sold at profit, the stamp duty can be claimed back later against CGT.

With the many changes on the horizon, it makes sense for buy to let investors to take advice as soon as possible. If you are an investor looking to add to your portfolio then you may be wise to do so sooner rather than later, but speaking to your bookkeepers for cash flow planning guidance is a good first move.

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