Buy-to-let stamp duty changes, what does this mean for Dubai investors?

Published on: 03/16/16 09:33:am

We are often warned about putting our eggs in one basket and when it comes to property it would seem that it is no longer the case that buy-to-let investments are the golden egg.

At one time property was seen as an easy way to generate income, with many expatriates investing in the UK homes market, considering it a fairly safe, long term way to quietly grow their wealth and income. As professional advisers, we often warn clients about the risks of illiquidity, cost, taxes, legislation change and the hassle involved with being a professional landlord, but the latest announcements come as a further blow to those intending on investing in property.It has been announced that from April 2016, stamp duty land tax (SDLT) will rise for those purchasing property to rent or buying a second home. The higher rates will be three percentage points above current SDLT. Now, a property valued at £175,000 – which could be termed typical for a residential landlord, stamp duty costs alone will be £5,250 more than a person buying their first home.

Property experts see this as potentially spelling the end to the buy-to-let industry. It comes in addition to the announcement that capital gains taxes (CGT) will be due within 30 days rather than at the end of the tax year from 2019. UK landlords will be further bitten by the fact they’ve recently found that higher and additional rate tax relief will no longer be allowed to be offset against their mortgage interest costs.

Key points from the UK stamp duty changes announcement are:

  • Increasing stamp duty rates for those purchasing buy-to-let property from April 2016 (see infographic below).
  • Capital Gains Tax (CGT) is also due to be payable after 30 days of property sale from April 2019.
  • For non-UK residents this comes as an added financial blow after CGT being announced to apply to them from April 2015 for property sales

What does it mean for non-resident landlords?

  • Non-residents looking to purchase property to let in the UK should reconsider their options as this may not be of the same financial benefit of previous years
  • Property prices could bubble in the short term between now and April as investors look to complete quickly
  • While property rents will likely rise in the short term, announcements such as these could be leading to further government support to first time buyers, which could result in rents falling in the future

Before making any investment it is always wise to speak to an expert hence ensuring what seems to be a sure fire return on investment is just that, and not a fragile shell that can be broken.

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