The Autumn Budget showed that this Government is quite prepared to use Tax as a weapon of political interference in the free market, with its draconian tax on second properties.
Yes we all know that there are not enough houses to go around, however the legislation could well have serious unforeseen consequences, particularly in the rental market.
In the Autumn Budget last year it was announced that there would be an additional 3% Stamp Duty Land Tax (SDLT) charge on the entire purchase price on second properties, in addition to the marginal charge rate based on value. The additional charge will come in to force from April 2016
On the HMRC website there are around 42 examples of when a “victim” would have to pay the tax. Even the home owner that sells, but whose completion dates don’t match will get caught.
An example is the purchaser that has to complete on their purchase, before their sale has completed; they may have exchanged……but that’s not good enough. The tax can be reclaimed, but still has to be paid.
Let to buy situations where a home owner buys on, however retains their own home as a rental property investment, are caught by the new tax hike.
Buy to Let properties, refurbishments and second homes are all caught by the new tax.
If, however, a person owns a main residence, plus say 3 buy to let properties, sells their home and buys another with matching completion dates, HMRC will view this as replacing one main residence with another, so the tax will not be payable.
The political imperative is to increase housing supply for people to purchase in the residential market. Vote winner??? Since the Thatcher Government came up with “Right to Buy” and most of the local authority housing stock was sold off at a snip, those not fortunate enough to be able to afford their own homes have been housed by private landlords.
The Government seems to be anti-landlord, the very landlords that provide houses for those that are not in a position to purchase………… So not only have they brought in this SDLT tax hike which will affect new second property purchases, in addition going forward HMRC have restricted the amount of interest that a buy to let landlord can offset against rent; so increasing their tax bill.
Yes, the Government wants to increase the supply of houses available to the residential market, but at what cost if the Landlords pull out of the market and there is no accommodation available to the less fortunate?
Its seems that the Government see property investment owners as “rich investors”, rather than providers of houses to the job mobile, those new to our shores, or simply those that need to have a roof over their head.
May turn out to be a short sighted policy Mr Osborne, as there is the possibility that it could create more problems than it solves.