Stamp Duty for Landlords
The reason people purchase properties is return on investment.
As of April 2016, any properties that are over and above £40k are charged at 3% over the existing stamp duty rate, this is retrospective to zero. This means a house at £40,001 would cost £1200.03 under the new changes.
This will have an impact on the South East and Overpriced “bubble markets” such as Manchester – but mean a lot of Investors will divert attention to the North East for high yielding, lower entry price level properties.
|Band||Normal Rate||Additional Property*|
|Less than £125k||0%||3%**|
|£125k to £250k||2%||5%|
|£250k to £925k||5%||8%|
|£925k to £1.5m||10%||13%|
|Rest over £1.5m||12%||15%|
The vast majority of the properties clients purchase in the North East are priced at £50-110k (new Stamp Duty working out at £1500 – £3300 respectively).
Therefore a few points to consider:
Stamp Duty is a cost of purchase and can be deducted in part from your capital gains tax bill (not all of it) when you come to sell the property as a cost transaction. (Always recommended that you speak to your accountant).
The reason why people invest in Buy to Let is to make a return… and in my opinion this extra amount will lead to a rent rise – Instead of receiving £425 per month on a £50k property… if you receive £435, this equates to the same return on investment including the stamp duty cost at £1500 (at a yield of 8%).
Where possible, from April next year, we will negotiate to have the cost of Stamp Duty reduced from the purchase price.
Finally… invest in the North. A London property priced at £450,000 will cost £26k to a new landlord in Stamp Duty, yet 7 x £64,285 properties will only cost £13,500, not only almost £13k saving on Stamp Duty but more than likely a much more impressive yield.
We need to recognise that out of the adversity of market sentiment… there will be opportunities for those who take advantage, and this is where Castledene Property Consultants comes in.
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