New Landlord Tax Explained

28 March 2018

The Landlord Tax Explained

While there are many reasons to invest in property and act as a landlord, a number of recent changes imposed by the UK Government has dampened enthusiasm within the industry. The new landlord tax issues come on two major fronts, and it is important that landlords understand what they are getting into when they invest in property.

Landlords Now Face a Surcharge when Buying Property

The most debated or discussed tax on landlords in recent times has been the implementation of an additional 3% stamp duty surcharge on anyone buying a second or additional property. It was initially thought that investors with a portfolio of at least 15 properties would be exempted from this change but prior to the April 2016 implementation; this was ruled out, with the stamp duty being applied to all investors buying an additional property.

Someone buying their first property will face a stamp duty charge of £2,500 on a £250,000 property but someone buying an additional property will face a stamp duty charge of £8,800.

Landlords Face a Surcharge When Selling Property

Landlords will face a Capital Gains Tax (CGT) surcharge in comparison to other investors, which has left many landlords feeling as though they are being victimised. CGT is a tax that is imposed on profits from the sale of an asset and from April 2016, CGT was cut at the basic and higher rate. The basic rate of CGT used to be 18% but this was lowered to 10% and the higher rate used to be 28% and this was cut to 20%.

However, landlords have been informed that the reduction in CGT will not apply on any gains made on the sale of residential property, which means that the original rates of 18% and 28% stand. Some people say that there is no difference in CGT for landlords but when every other form of investor receives a benefit and landlords don’t, they are correct to view it as an 8% surcharge on CGT.

The Government Believes These Changes Will Bring in Considerable Sums of Money

By 2020, the government is aiming to bring in £1 billion from their changes and they believe that the additional stamp duty will help first time buyers gain a foothold in the market. There are different schools of thought on the overall impact of these changes, some fear that they’ll lead to a fall in property prices and a rise in rental fees but observers are keeping a close eye on the market to see what changes can be found.

Anyone who is unsure of the latest changes in the lettings industry or what the implications of these changes are should contact a lettings agent for guidance and advice. Letcom is more than happy to provide guidance and assistance to any landlord or potential landlord who wants to know the state of the industry and taxation they are likely to face in the years to come. There are still many great opportunities for landlords to invest in property but it is important that anyone doing so understands the full state of the industry.


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