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Buy-to-Let Watch: We need time to assess impact of tax changes

Whittaker_David_2015

Thank goodness Osborne left landlords alone – we need time to assess how the existing changes affect the industry

The Budget came and went with no more nasty surprises for residential landlords. This is a good thing as we need time to assess how the stamp duty and tax relief restrictions affect the industry before any more measures are introduced.

Indeed, at the same time as the Budget the final policy design for SDLT on residential property was announced. As expected, the 3 percentage point surcharge on additional residential property comes into effect on 1 April – but there will be no exemption for large or corporate investors, as had been mooted originally.

It is worth remembering at this point that, for purchases of six or more residential properties bought in a single transaction, the purchaser can choose to apply either the residential rates of SDLT with multiple dwellings relief or the non-residential rates of SDLT to the entire transaction.

Mixed-use properties are subject to the non-residential SDLT rates so it was good news that the Chancellor announced the immediate replacement of the previous ‘slab’ rate system with a ‘layered’ tax. For transactions valued at less than £1,050,000 this will result in a reduction of SDLT, whereas those above will incur an extra 1 per cent on the excess above £1,050,000.

At the time of writing I am unable to give you a final report on how well (or not) buy-to-let purchase applications were processed and completed before the stamp duty surcharge was introduced.

I can tell you that my team is working overtime to ensure cases get over the line and I have also heard from lenders that intend to work over the Easter weekend to ensure expectations are met. I am not entirely certain the same thing can be said of solicitors. It will be interesting to see what fall-out occurs.

Lenders have altered criteria and shuffled prices recently. Kent Reliance has reviewed its policy on ‘transfers’. Investors that own property personally may now ‘transfer’ it into an SVP or LLP structure, subject to meeting the other criteria. Directors’ loans or gifted equity for the difference between the new loan amount and the value of the property are also now permitted. Additionally, borrowers may access funds for stamp duty, capital gains tax and legal fees because, after all, a ‘transfer’ is actually a sale.

Accord Mortgages, Paragon Mortgages and Virgin Money have all introduced new products or refreshed existing ranges while The Mortgage Works has tightened its policy regarding HMOs.

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David Whittaker is managing director of Mortgages for Business

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