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News - Published 21st December 2015

A bad year for individual landlords

Following the proposed restrictions on tax relief for financing costs, and the removal of the wear and tear allowance announced in the Summer Budget there is further bad news for individuals purchasing buy to let property.

In the Autumn Statement 2015, the government has announced that higher rates of SDLT will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes, from 1 April 2016.

The higher rates will be 3 percentage points above the current SDLT rates. Affected investors will suffer SDLT of 8% on the element of purchases above £250,000 when the changes take effect. This measure will particularly affect buy to let investors in the South East where properties tend to be more expensive.

It was also announced that from April 2019, a payment on account of any CGT due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal.

The combination of provisions announced this year impacting buy to let landlords, will lead many to feel that they are being unfairly attacked by a government which sees them as a soft target. Some may now start to consider whether holding property in a company is a better option, although transferring existing owned property can be also be expensive from a tax point of view.

The government will be hoping that these provisions play a role in cooling down the property market, and make homes more affordable for first time buyers. However, it is also likely that an unintended side effect will be a negative impact on tenants, who may find their landlords passing on the additional tax burden in rent increases!

For further information, please contact Stephen Hemmings at shemmings@menzies.co.uk

Find out more about Menzies Property & Construction sector services.

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Richard Godmon - FCA CTA

Partner

Richard Godmon is a Menzies Tax Partner in the Solent office specialising in corporate tax for SME businesses and personal tax planning for individuals.