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02 March 2016

Don’t be a buy-to-let April fool warns property lawyer

With the diary rapidly counting down until the introduction of the new buy-to-let tax, one Buckinghamshire lawyer says time is running out for anyone who wants to save money and beat the deadline.

From 1 April, stamp duty on buy-to-let and second homes will be subject to an additional 3 per cent, adding thousands of pounds onto the amount payable to the taxman.

Martina Razaq, property expert at Gerrards Cross-based law firm B P Collins LLP, says her team is already witnessing a last minute rush as prospective homeowners bid to save money.

“The first few weeks of the year have already been much busier and we certainly expect to be burning the midnight oil as 1 April gets closer,” she said. “Given the time it usually takes for a sale to go through, the ideal buyer right now would be someone who doesn’t have a property to sell and is able to pay cash for a property.

“The delays that can occur in a chain, when obtaining a mortgage, or dealing with landlord or management companies, will make it difficult for any other type of buyer.”

Martina says the approaching deadline hasn’t been helped by the fact that the finer details of the new policy are still yet to be announced, something she expects will be addressed in the upcoming Budget.

One key issue is that anyone buying a new property before their original home has been sold, will potentially trigger the much higher rate tax because the new purchase would be treated as a second home.

It may be possible to claim tax back once the first home is finally sold, and it is suggested that the latest date by which such tax can be reclaimed is be 18 months from completion of the purchase of the second home. This is subject to any proposals that may be in the Budget.

She believes it is smaller, private investors who will be hit particularly hard hit, explaining: “Anyone who, for example, has a flat and wants to keep it as a future nest egg while also buying a new family home, is likely to have to think twice as they will face a much higher tax bill.

“Also harder hit are those in their late 40s/early 50s who may have saved enough money to invest in a buy-to-let property as an enhancement to their pension. The effect of the tax deadline has been to force their hand into making that investment now, because they are reluctant to give away any more than they have to.”

With first-time buyers already finding it difficult to get onto the housing ladder, Martina says when cheaper properties do come on the market in desirable areas, they are more likely to be snapped up by corporate investors than individuals.

“Corporations or landlords with more than 15 properties in their portfolio are not subject to the new second home/buy-to-let tax, so those who saw themselves as amateur landlords with an investment from just one or two properties will lose out even more,” she added.

The changes have undoubtedly created a great deal of speculation in the market as to what will happen, with some reports of higher priced properties likely to drop in value as new buyers are unwilling to pay higher stamp duty costs, while homes at the lower end of the market are in even more demand.

To find out more, call Martina Razaq on 01753 279065 or email martina.razaq@bpcollins.co.uk.

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