To Buy...To Let? No More ?
Buy to Let has become rather less attractive as an investment after a number of measures introduced by the Chancellor in what he has described as levelling the playing field for home buyers as against buy to let investors.
For wealthier landlords – for these purposes those liable to higher rates of income tax – the relief for mortgage interest will be restricted to the basic rate. The change, announced in the July 2015 Budget, will be phased in over 4 tax years starting from April 2017.
A second measure, affecting all landlords is the replacement, from April 2016, of the 10% pa “wear and tear” allowance by a relief for costs actually incurred.
The Chancellor’s Autumn Statement has added to Landlords’ (and second homeowners’) woes with two further measures.
From April 2019, Capital Gains Tax will have to be paid within 30 days of the completion of a transaction. This is a significant acceleration the payment of the tax and will give the Chancellor a cash flow advantage. It also gives the taxpayer far less time to deal with the administrative burden of identifying allowable expenditure – eg on acquisition and improvement – in order to calculate and account for the tax liability.
As a further disincentive to invest in Buy to Let, the Chancellor has also announced that investors in Buy to Let (or second homes) will face a 3% Stamp Duty Land Tax surcharge from April 2016.
There is no doubt that these measures will tip the balance when Buy to Let investment is compared with other investment opportunities. Some landlords, or prospective landlords, will no doubt be deterred from buying.
There may be some landlords looking to divest property investments though the prospect of a capital gains tax liability will have to be weighed. There are ways to defer or avoid the CGT by reinvesting proceeds to secure tax advantages. At the same time, the exposure of a landlord to Inheritance Tax may also be reduced.
Summer Budget 2015 see paras 1.190 – 1.192
Spending Review and Autumn Statement 2015 see paras 3.70, 3.76