The media has been full of predictions of the end of the (buy-to-let) world since George Osborne sat down having delivered his 2015 Autumn Statement. The wrecking ball announcement was the 3% additional Stamp Duty Land Tax that any buyer of an additional home would be charged from 1st April 2016. Was it, asked the Guardian, bye-bye to Buy-to-Let and selling agents rushed their favourite papers to bemoan a savage Chancellor whose response to their pleas for a re-think on the top rate of SDLT announced in the previous Autumn Statement instead delivered a kick in the basement! Could London’s place in the crown of international markets be under threat asked the Telegraph?
In my view the answer is “unlikely”. What most people have forgotten is that 2nd home owners (including buy-to-let landlords and overseas buyers) now have to pay Capital Gains Tax on any profit they make. One of the costs that they can off-set against any gain is Stamp Duty Land Tax. One of the others it’s worth mentioning is any fee you pay to a good looking, diligent and clever buying agent, at least that’s what the guidance from HMRC seems to suggest.
Better still, if you make a loss (despite the expert advice from your favourite buying agent!) then this CGT loss can be carried forward – indefinitely!
Last year 200,000 sales out of the 1.1m were to 2nd home owners (although sales of Scottish property are currently NOT liable under the Scottish Land & Business Tax system). For someone buying a £185,000 home the additional tax would rise from £1,200 to £6,750. This website provides a handy calculator for what 2nd home buyers can expect to pay. The Treasury are consulting on the detail. Will MP’s second homes be caught? Can one spouse own one home and the other another? All needs to be clarified.
So, before we knock out a headstone for the 2nd home markets, for Rock or Burnham Market or for Prime Central London where 30% of homes fall into this class remember that because there are some expenses that can be reclaimed agains CGT this initiative may not be as draconian as it seems. Those able to afford good advice may discover that they are no worse off – at least in the long term.