The reluctance of banks to lend too much cash to people for properties was already slowing down the buy-to-let market. Now it seems there could be another spanner in the works, following George Osborne’s Autumn Statement.
The chancellor announced higher stamp duty bills for anyone buying a second home, holiday home or rental property. It’s part of an effort to find the government an extra £4 billion from taxes.
What this means for property investors is an extra £7,500 to the purchase of a £250,000 property. Buying a second property worth £500,000 will set you back £30,000 in tax – that’s twice the amount currently charged.
There has been some controversy reported in the press surrounding the decision. Many experts believe it could be detrimental to the property market, as people change their minds about investing their money in property.
It’s also been criticised by many who were planning to use investment or income from buy-to-let properties in their retirement, partly due to low returns from banks and building societies. With the new taxes chipping away at hard-earned savings, people may have much less money to live off or invest in their later years.
Currently, buyers pay no stamp duty on the first £125,000 of a property’s price. The bill is two per cent on anything up to £250,000, five per cent up to £925,000, 10 per cent up to £1.5million and 12 per cent on anything beyond that. When the reforms come in, buy-to-let buyers will have to pay an extra 3 per cent on each band.
It’s not all bad news though. While those with cash to splash on second, third or fourth properties, the new taxes will help those starting out, according to Osborne. In his statement the chancellor said the money collected in taxes would be used to help first-time-buyers and pay towards affordable housing for people on lower incomes.
Do you need financial advice to help you secure a mortgage for a second property? Outlet can help. We have a financial services department that offers mortgages, insurance products and more. Give us a call on 020 7287 4244 to find out how we can help you.