The Chancellor has confirmed that the 3% higher rate of stamp duty for those purchasing additional residential properties – such as second homes and buy-to-let properties – will come into force on 1 April 2016.
He added that larger investors won’t be exempt from the higher stamp duty, which “will apply equally for purchases by individuals and corporate investors”.
There is a small concession to home movers who have a period that overlaps between buying one home and selling another – and therefore end up temporarily owning two homes or have a gap in ownership of their main property.
Purchasers will now have 36 months, rather than the originally proposed 18 months, to claim a refund from the higher rates of stamp duty or before the higher rates will apply.
In another blow to buy-to-let landlords, the Chancellor has excluded them from the cuts he has made to capital gains tax (CGT) rates. While the higher rate of CGT will be cut from 28% to 20% from April 2016, and the basic rate will go down from 18% to 10%, CGT rates for second residential properties will remain unchanged.
Mirroring the residential stamp duty slice system, George Osborne has announced changes to the way that stamp duty on freehold commercial property is calculated. Instead of the current rates that apply to the whole transaction value, new rates will apply to the value of the property over each tax band.
The new tax bands – which come into force on 17 March 2016 – will be 0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000. Buyers of commercial property worth up to £1.05 million will pay less in stamp duty.
The Chancellor announced that the government will soon publish a call for evidence on how to make housing transactions more consumer-friendly, saying that people spend £270 million a year on failed housing transactions.
He also said that there would be a consultation on options for increasing transparency in the property market, including increasing the visibility of information relating to options to purchase or lease land.
Commenting on the Budget’s housing measures, Russell Quirk, chief executive of eMoov, says: “It’s a very disappointing budget from a property point of view and for UK buyers and sellers. The capital gains tax reductions, while bold, are a missed trick and a kick in the teeth for those second home-sellers, who will not benefit from a reduction in CGT on their property sale.
This was hardly a budget to assist hard-working people with more than one property, not to mention Mr Osborne’s total failure to address the issue of housing supply that has been touched upon in previous budgets.
“The move to apply new stamp duty changes to larger institutional investors, as well as smaller buy-to-let landlords, is a fair one, although I believe this was probably an oversight from last year and nothing to shout from the rooftops about.
“I think the move to mirror the residential stamp duty slice system for commercial properties is also a fair one, but again, not a move that will benefit the man on the street, but more the larger commercial developer.”
Lucian Cook, Savills UK head of residential research, adds: “Keeping the old rates of CGT on residential property will make it more difficult for existing buy-to-let investors (who face a cut in income tax relief on interest payments) to reorganise their portfolios towards better performing property. It will also act as a longer-term disincentive to invest in residential property compared to other asset classes, which may put further pressure on the supply of private rented homes against the backdrop of rising demand. That may well put upward pressure on rents.”