The Good and the Bad News for Landlords in 2016
In April 2016, the Government increased the rate of stamp duty payable on second homes. The measure was designed to curb the booming buy to let market and give first time buyers a better chance of getting their feet on the property ladder. In 2017, new tax measures will begin to be introduced, with Mortgage Tax Relief to be phased out starting from April 2017.
Though on the face of it, this doesn’t sound like great news for landlords, the knock on effect of increased rates and reduced tax relief will be higher rents. Experts are predicting that average rents will skyrocket across the UK, bringing the nation’s landlords a big boost in turnover.
Increase in stamp duty
As of April 2016, buyers purchasing second properties will have to pay an extra 3% in stamp duty. Though this won’t have a big impact on lower value properties and one-off purchases, professional landlords and those looking to invest in high value homes could be hit hard.
For example, prior to April 2016, a landlord purchasing a property for 200,000 would have paid £1,500 in stamp duty. Now, the same purchase would incur a stamp duty bill of £7,500. A property worth £350,000 would previously have cost the buyer £7,500 in stamp duty, now it will cost a whopping £18,000.
Changes to tax rules
In the coming year, the Government plans to introduce a number of changes to the tax rules relating to landlords. Some expenses will no longer be allowable and the way that landlords calculate their tax will begin to change. The full force of these new rules won’t come into effect until 2020, but landlords around the country may well begin to feel the pinch long before then.
As a result of these changes, the buy-to-let market in the UK began to slow towards the end of 2016. One large independent estate agency has reported that landlords registering to buy properties has dropped by a huge 52.9% annually and buy-to-let sales were down 64% in the 12 months to November.
On the upside, many property experts are predicting that rents will go up sharply in 2017. As some landlords sell off their rental stock, the number of rental properties on the market may well dip, this will increase demand and push rents up. What’s more, as landlords begin to pass the increased costs of home ownership and taxes onto tenants, the average price of rent will go up.
Though changes to tax rules and stamp duty have presented landlords with some challenges, on the whole 2016 has been a good year for the sector. If you’re considering investing in buy-to-let property and want to find out what’s on the market in your local area, take a look around our site today.« Back to Latest Monthly News