The UK government increases the tax burden on investors

The UK government announced a new measure aimed at limiting investment “buy to let” property market in the UK.

As announced recently plans to increase Stamp duty for buyers who buy themselves an object for investment or second property from April 2016. The government plans to collect these measures in the budget an additional £880 million by 2020. Moreover, large corporate investors are going to exclude from this scheme. This news infuriated market participants.

First, the introduction of additional tax burden in April 2015 may spur investors to make transactions until April 2015, which will give rise to higher prices. Secondly, a sharp decline in investment after April 2016 may lead to shortage of supply in the rental market that much to raise rents.

For London is the increase in stamp duty for investors can be catastrophic. Already in December of last year, increasing Stamp duty, it became clear how much it affects the rental market, when the main burden of the tax increase fell on the tenants.

Exclusion from the scheme of the corporate sector will shift the main tax burden on private investors, which can create a noticeable stagnation in the market of sale of residential property, which is suffocating from a lack of new objects.

Another unpleasant news for investors was the introduction of the payment of the “tax on capital gains” in just 30 days after the sale, which will be in force starting from 2019.

This means that after April 1, 2016, all property investors in the UK and those United Kingdom citizens who buy a second home will have to pay Stamp duty 2% and 5% of the purchase amount exceeding £125000, and the amount of Stamp duty with the amount of your purchase more expensive at £1.5 million, will be 12% and 15%. The obligation to pay the “tax on capital gains” within 30 days will be the second blow to investors. Now investors are provided with up to 21 months, depending on when the end of the tax period to fully assess the income of the investor.

Peter Lambert, CEO “the National Association of Landlords” believes that the government should exercise extreme caution , introducing measures to increase the tax burden on the rental market in the UK.

Does not lose optimism only “the Council of Mortgage Lenders in the UK”. How quick to assure Peter Williams, Executive Director of the Council, “an increase in Stamp duty will increase the initial financial burden of the investor, but the mortgage trade can be spread over a long time, evenly distributing the financial burden and it will not be a great burden for investors who enter into a contract for the long term”.

® Alice Morgan. G. 25.11.2015

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