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3% Higher stamp duty land tax on buy-to-lets in the UK

by Sable International | Dec 10, 2015
  • The Autumn Budget announced a 3% increase in Stamp Duty Land Tax for purchases of buy-to-let properties. This was the latest in a series of changes to the tax efficiency of buy-to-let investments. Those considering entering the buy-to-let market would do well to familiarise themselves with this and other recent changes to the taxes on this asset class in the UK.

    The erosion of tax relief since 2014

    In April 2014, we saw significant changes to the tax treatment of high value buy-to-lets held by offshore entities with the Annual Tax on Enveloped Dwellings (ATED) regime. April 2015 brought with it the start of the new capital gains tax regime for non-resident owners of UK buy-to-lets.

    In June’s Summer Budget, George Osbourne announced the phased reduction of higher rate tax relief for buy-to-let owners. Following this announcement, property investors began to ask themselves if this was the nail in the coffin for UK residential property as a favoured asset class. The answer to that question, however, depends on your circumstances.

    It is still worth investing in UK property?

    The rationale for purchasing and then renting out a property is simple: As a complement to a well-funded pension, property provides a predictable income stream that is yield based. Unlike your pension pot, the property’s value is not being eroded as you draw income; the pot won’t run out. 

    With traditional low risk income assets’ (like gilts and bonds) forward-looking investment returns looking low, reliable (non-reducing) income in retirement is becoming more attractive. This remains true regardless of this latest change to the tax treatment of buy-to-lets. However, if you want to maximise your tax efficiency you need to ensure you buy your property before April 5th 2016, when the changes come in to force. 

    New tax regime for the buy-fix-sell market

    Those worst affected by this change are individuals trading properties in their personal names. Such buying, fixing up and selling of buy-to-lets will now have a 3% additional charge on each purchase transaction.

    While the details of this new rule are not yet clear, it was also announced that certain reliefs would be available for corporates involved in increasing and improving the housing supply. 

    If you need advice on how to manage your property investments in the UK contact our mortgages team on +44 (0) 20 7759 7514. Alternatively, fill in this form and one of our investment experts will get back to you.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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