The effect of Buy to Let and Second Home Stamp Duty Increases – 10th December 2015

The Autumn Statement on 24th November announced that there would be significant changes in the amount of Stamp Duty Land Tax (SDLT) for Buy to Let investors and those wishing to purchase a second home.

It was announced that an additional 3% Stamp Duty will apply to the whole property purchase price for these types of property purchases. The tax bill on a property valued at £250,000 will jump from £2,500 to £8,800 from 6th April 2016. This is an increase of £6,300!! This move will net The Exchequer an extra £625m next year alone.*

The impact upon the total purchasing costs of buying these properties is easily calculated, but what about the impact to the mortgage market in this area? As advisers we are already seeing changes coming through from lenders in the way that they calculate the rental ‘stress test’ for Buy to Let Properties. This week some lenders confirmed that they are looking to factor in the extra Stamp Duty costs for Buy to Let landlords, and they will be increasing the rental ‘stress test’ from 125% to 135%. Put simply, to obtain a mortgage of £150,000, the rental income for the property would now have to be £977.06 per month. At the previous 125% ‘stress test’ level, the rental income would have needed to be £904.69 per month.

We will wait to see if other lenders follow suit……

If you are thinking of buying another property either as a Buy to Let, or a second home, it is certainly worth considering your position before 6th April when these SDLT increases come into effect.

Your home will be repossessed if you do not keep up repayments on your mortgage. The Financial Conduct Authority does not regulate Buy To Let Mortgages.

*Source: The Daily Telegraph 9th December 2015