2016 – All change for landlords and property developers
The Chancellor’s Autumn Statement threw a few hand grenades into the world of buy to let and second property ownership last month. But if you’re a landlord or property owner/ developer fearing the worst for 2016, you’ll be glad to know that’s it not all bad news. There are ways to reduce or avoid the effects of the planned changes. Provided you act fast.
If you’re buying an additional property from April 2016 that’s worth £150,000 or more, you’ll pay 10 times more stamp duty than you would have before the Chancellor’s Autumn Statement.
As things stand, if you a buy a house worth between £150,000 and £250,000 as a second home or buy to let property, you pay £500 SDLT. From 1 April 2016, that amount will shoot up to £5,000, an eye-watering difference. But even here, there are at least some crumbs of comfort:
Buy now, buy fast: The news has seen property developers accelerate their plans, shifting their buying strategies to frontload the new year with purchases, thereby avoiding the April SDLT hike. You can do the same if you act fast.
Play the long game: As the rules currently stand, you can offset the cost of buying that new buy to let property in Fylde and Wyre against your capital gains tax bill when you come to sell. So whilst the upfront cost of the SDLT may be a bitter pill to swallow, you may get it back in the longer term. Bear in mind, though, there’s nothing to stop the government changing the rules.
Buy to let mortgage changes
We can’t blame the Chancellor’s Autumn Statement for this. Instead we need to return to the Budget earlier in the year which reduced landlords’ ability to offset mortgage interest costs against rental income.
The changes start a phased implementation in 2017. If you’re a landlord with a mortgaged portfolio, they could dramatically affect your income. There are, however, a number of ways to reduce the impact and protect profits. We’ve explored some of these previously here. But to ensure you’re protected come 2017, you need to take action in 2016.
Every few months we write a post explaining how interest rate rises are just around the corner. And a few months later we write another post explaining how they’re still just around the corner.
Earlier this year, the smart money was on an interest rate rise anytime now. But the perceived fragility of global markets means there’s likely to be no interest rate rise until late 2016 at the earliest. Longer range predictions show interest rate rises less pronounced than they were too, so affordability of property in North Fylde – at least from an interest rates perspective – looks set to continue.
2016 for landlords and property investors on the Fylde
If you’d listened to the immediate reaction to this year’s Budget and Autumn Statement you could have been forgiven for wondering whether the changes made buying to let worthwhile.
There’s no doubt the changes that we’ll see arriving next year and beyond will make life more challenging, but there are ways to reduce the impact and keep returns at meaningful levels. What the changes certainly do confirm is that now more than ever it’s worth seeking the impartial, expert opinion that can help you find your way through the Chancellor’s minefield. For that, you can get in touch here.