George Osborne announced in his Autumn 2015 statement that he will be adding 3per cent stamp duty to every single duty band for buy-to-let and second homes. Mr Osborne commented 'Frankly, people buying a home to let should not be squeezing out families who can't afford a home to buy.'
This 3 per cent may not sound much but if you examine the sums this can treble the stamp duty bill. For example say you brought a property for £275,000 on a buy to let basis, then your stamp duty bill will increase from £3,750 to £12,000. This may seems worse on first inspection, as the original stamp duty on the £275,000 property was believed to have risen to £10,800. As the bill increases because the chancellor said stamp duty doesn't apply on properties up to £40,000, once you go above that level the initial 3 per cent of stamp duty charged up to £125,000 is levied on the entire property price.
This method seems to go back to the old slab-style system that Mr Osborne stood up and abolished only a year ago. This means that stamp duty for buy-to-let and second homes is now effectively a hotchpotch of an extra 3 per cent charge, the new progressive system and the old slab-style system.
This now is addition to the new tax rules that announced only recently by the Chancellor, were Landlords will soon loose the ability to offset all their mortgage interest against tax rental income.
The latest step was even described as 'catastrophic news for the private rental sector' by David Cox, of the Association of Residential Letting Agents
The Chancellor estimate that stamp duty revenue is forecast to rise from £11.2 billion this year to £17.8 billion in 2020/21.
The problem will this strategy will:
So, while they will get whacked with a big bill now, if a buy-to-letter eventually sells at a tasty profit, they can claim stamp duty back later against CGT.
Credits to Simon Lambert from This is Money.