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Following the Chancellor’s tinkering with the Tax Relief Rules on expenditure earlier this year, he is making life difficult again for buy-to-let investors. This time with an increase in Stamp Duty Land Tax rates. Any purchases of additional residential properties, such as second homes and buy to let properties, will be subject to an additional 3% above the existing SDLT rates, from 1 April 2016.

There are some exceptions. The new rates will not apply to purchasers of caravans, house boats or mobile homes. Corporate entities also escape the additional charge, so this may be something to think about for investors. There will however be a period of consultation, and HMRC will then decide whether corporates owning more than 15 residential properties will be exempt from the increased rates.

The new rates will be

£0 to £40,000 0%
£40,001 to £125,000 3%
£125,001 to £250,000 5%
£250,001 to £925,000 8%
£925,001 to £1.5 million 13%
Over £1.5 million 15%.

As an example of the new rates, on a purchase price of £350,000 the tax will increase by £9,300.

By way of reminder, the annual 10% wear and tear allowance will be replaced by a new system from April 2016 – this was announced earlier this year. Landlords of fully furnished property will be able to claim relief for the actual cost of replacing furnishings. There may therefore be some advantage in delaying expenditure until after 5 April 2016.

The change in these rules is clearly all part of Government policy to encourage homeownership. There is a limited supply of houses, and whilst they say they are to assist in the delivery of 400,000 new homes by making public sector land available, the Government is clearly trying to deter some investors. Please therefore seek good legal advice!

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.