Changes for landlords in the 2016 Budget
Buy to let landlords were hit again in the pocket by Chancellor George Osborne’s Budget 2016.
Investors ploughing cash into commercial property will pay more stamp duty from March 17, 2016.
The rules are changed to align with the way stamp duty is calculated for residential property from April this year.
Instead of the rate applying to the transaction value, the amount due will apply to the property value in rate bands.
Properties worth up to £150,000 are zero-rated.
Between £150,000 and £250,000, the tax rate is 2% and for over £250,000, the rate is 5%.
So a commercial property valued at £275,000 pays stamp duty of 2% on £100,000 and 5% on £25,000, which totals £3,250.
“Buyers of commercial property worth up to £1.05 million will pay less in stamp duty,” said the Chancellor.
Stamp duty or leasehold rent transactions will also change, paying 2% stamp duty rate on leases with a net present value over £5 million.
Osborne also confirmed the rise in residential stamp duty will apply to all landlords. Earlier consultations suggested landlords with several properties may have been exempted, but this is no longer the case.
Capital gains tax rates also change – but not for residential property investors.
Commercial landlords see the top rate drop from 28% to 20% and the lower rate from 18% to 10%. Buy to let landlords or residential property investors will continue to pay the 8% surcharge on each rate.
Landlords do gain from the increase in income tax personal allowances – up from £11,000 to £11,500 from April 2017 – and the rise in the higher rate tax threshold. This is the level taxpayers move up to pay income tax at 40%.
This rises from £42,385 to £45,000 in April 2017 and is expected to hit £50,000 by 2019-20.
Insurance Premium Tax (IPT) on landlord, buildings and motor insurances goes up 0.5%, with an expected £700 million additional tax going to fund additional flood defences.
As premiums are going down with the demise of claims management companies, whether this is a tax increase remains to be seen.