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‘Landlords should get stamp duty surcharge exemption’

The government should make landlords exempt from the 3% stamp duty surcharge on second homes, argued Mary-Anne Bowring, managing director at property management firm Ringley Group.

She added that a rise in buy-to-let investment could also support housebuilding, as landlords are an important source of development finance through off-plan sales that are necessary to get debt funding for construction.

Bowring said: “There is a huge opportunity still for buy-to-let investors in the UK rental market, which is only predicted to grow in size.

“That’s why institutional investors such as pension funds and insurers are investing billions in building homes for rent, as they see an opportunity to secure income-producing investments that hold up well during a downturn.

“Government efforts to restart the housing market should reflect long term pre-existing trends and that includes the continued growth in private renting.

“If the government wants to kill two birds with one stone – boost activity in the housing market and provide much needed rental homes – it should exempt landlords from the second home stamp duty surcharge immediately.”

She added that rental housing is likely to prove more resilient during this downturn than other real estate sectors such as retail and offices, as people are more likely to rent rather than buy during a recession.

The number of renters was predicted to increase before the virus, as housing affordability and changes in lifestyle and the jobs market mean more people are renting and for longer. Bowring said these fundamentals should remain post-virus.

BY RYAN BEMBRIDGE

Source: Property Wire

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Budget 2020: Stamp duty surcharge for non-UK buyers

The government has confirmed it will levy a stamp duty surcharge for non-UK residents buying property within the UK.

In his debut Budget speech today (March 11), new chancellor Rishi Sunak announced a 2 per cent surcharge on the existing tax levy — currently between 2 per cent and 10 per cent depending on the property value — for non-UK investors in UK property.

It was originally thought the surcharge would be a 3 per cent additional levy for overseas buyers, but Mr Sunak’s Budget speech confirmed a 2 per cent hike.

The new rules will come into effect from April 1, 2021. Supporting documents published today said: “This will help to control house price inflation and to support UK residents to get onto and move up the housing ladder.”

Mr Sunak said this additional income to the Treasury would go towards helping rough sleepers find permanent accommodation, create 6,000 new places for people to live and trigger a step change in the support services for homeless people.

Tom Bill, head of London residential research at Knight Frank, said the move would bring the UK in line with “many other global property markets”, adding any attempts to ease affordability pressures should be welcomed.

He added: “Furthermore, a wider re-think of stamp duty rates is still needed to increase housing market liquidity and maximise any stimulus the government plans to provide to the UK economy.”

But Guy Harrington, chief executive of property lender Glenhawk, said the policy was “misguided”.

Mr Harrington said although the levy would be a valuable source of income for the Treasury from all over the world, the chancellor’s focus should be on measures that would stimulate the housing market and support current and potential homeowners across the pricing spectrum.

By Imogen Tew

Source: FT Adviser

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Housing market may see spike in overseas buyers ahead of stamp duty surcharge

From April 1 2021, the Government will introduce a 2% stamp duty surcharge for non-UK residents purchasing homes in England and Northern Ireland.

A stamp duty surcharge for non-UK residents is set to come into force next year – and could spark a scramble among overseas investors to buy properties before it kicks in.

From April 1 2021, the Government will introduce a 2% stamp duty surcharge for non-UK residents purchasing homes in England and Northern Ireland.

Budget documents said the move will help to control house price inflation and to support UK residents to get on to and move up the housing ladder.

The money raised from the surcharge will be used to help tackle rough sleeping.

But some experts suggested there could be some increased activity among non-UK residents looking to snap up homes before the new rules come into force.

London, in particular, tends to attract wealthy property investors from overseas.

There will likely be some increased activity among non-UK residents looking to purchase before the new rules come into force

Richard Donnell, Zoopla

Richard Donnell, director of research and insight at Zoopla, said: “The additional 2% stamp duty surcharge for non-UK resident buyers represents the latest in a long series of tax reforms, and may have a short-term impact on demand in higher-value markets once it is introduced.

“For those who are looking at a longer-term hold, the additional up-front purchase cost will diminish in significance over time.

“In the interim, however, there will likely be some increased activity among non-UK residents looking to purchase before the new rules come into force.”

Mr Donnell said dollar-denominated buyers may find that the additional stamp duty cost is partly offset by currency movements in any case, with an effective discount of more than 20% for those buying UK property now compared with the summer of 2014 purely due to movements in the pound.

Mark Hayward, chief executive, NAEA (National Association of Estate Agents) Propertymark, said the stamp duty surcharge would allow those in the UK to have a better chance at purchasing a home.

He continued: “However, overseas buyers tend to purchase properties in prime central London which are completely unaffordable to most home buyers anyway.

“Therefore, this move will not help those that need it most. Ultimately, by energising surcharges, it is likely that purchasers will factor this additional cost into any offers they make on a property so prices may be pushed down in areas where overseas buyers are purchasing.”

Rachael Griffin, a tax and financial planning expert at Quilter, said: “This represents a crowd-pleasing policy which will win over people worried that foreign house buyers are hoovering up UK property as an investment, only to leave it empty, which further exacerbates the housing crisis gripping the nation.

“While this surcharge introduction is welcomed, increasing the UK’s housing stock will have a more important impact for domestic buyers.”

But Tom Moran, a partner at law firm Charles Russell Speechlys, said: “This imposed tax burden pushes the UK out of kilter with other European countries and will adversely impact London as a leading international city.”

The Budget documents also said the Government will explore how to improve the guidance available for self-employed people applying for a mortgage.

The Government has committed to creating at least one million new homes in England by the end of this Parliament and an average of 300,000 homes a year by the mid-2020s.

It will also look at long-term reforms to the planning system.

Source: Shropshire Star

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Government unveils plans for 1% Stamp Duty surcharge on overseas property buyers

The Government has finally announced how an extra Stamp Duty surcharge on foreign investors would work.

The idea was first proposed by Prime Minister Theresa May at the Conservative Party conference last October and then mentioned in the Budget later that month, but a consultation has only just been released.

The charge would add an extra 1% to the existing rates for both standard and additional residential purchases in England and Northern Ireland.

It would apply to non-UK residents, which the consultation defines as anyone who has spent fewer than 183 days in any part of the UK – including Scotland and Wales – in the 12 months prior to the transaction completing.

Overseas buyers will be able to apply for a refund if they spend 183 days or more in the UK in the 12 months following day of transaction.

The charge will also apply to companies based overseas as well as UK limited companies under the direct or indirect control of one or more non-UK resident persons.

It will also apply to joint purchases where at least one party is a non-UK resident.

The Government said it is considering exemptions for those who work for the Crown, Armed Forces or Civil Service to support those based overseas.

Additionally, first-time buyers who are non-UK residents will still get to use some of the Stamp Duty relief up to £300,000, but will have to pay 1%.

The consultation said: “The Government believes that introducing an Stamp Duty surcharge of 1% on non-UK resident purchasers of residential property in England and Northern Ireland will help to control house price inflation, thereby assisting residents in getting on to the housing ladder in line with the Government’s wider objectives on home ownership.”

Mel Stride, financial secretary to the Treasury, said: “The UK is and will remain an open and dynamic economy, but some evidence shows that non-UK resident buyers of UK property could be inflating house prices.

“A 1% surcharge could help more people own their own homes in the future, and its proceeds will go towards tackling rough sleeping, boosting our plan to halve the numbers of rough sleepers by 2022.”

The consultation closes on May 6.

Source: Property Industry Eye

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The everyday scenarios where you could be hit with the stamp duty surcharge

You may think the 3% stamp duty surcharge is reserved for buy to let landlords and second home buyers. But these ordinary family scenarios show where unsuspecting people may be caught out by a larger tax bill.

The stamp duty (SDLT) surcharge was introduced in April 2016, adding 3% to the usual stamp duty rates on buy to let properties and second or holiday homes.

While well intentioned, the stamp duty surcharge has actually brought some unsuspecting homeowners and homebuyers into scope of the additional 3% tax bill.

Nick Morrey, product technical manager at John Charcol, says: “Like many taxes there are plenty of scenarios that have been unexpectedly caught up in George Osborne’s additional stamp duty net.

“Property transactions have a variety of nuances and mechanisms that can potentially affect the nature of a qualifying purchase. Some of these could help reduce or even eliminate this liability. Therefore, it is important to take independent tax advice from an accountant or tax adviser in conjunction with a good mortgage broker to ensure you only pay what you need to pay. It’s important to check these things as not all options are appropriate to all consumers.”

Here are three scenarios to watch for and what, if anything, you can do to minimise the charge:

1) Adding partner to mortgage and title deeds

More and more Brits are cohabiting rather than rushing down the aisle. But when it comes to finances, Brits may show more commitment to their partner via shared bank accounts and joint house purchases.

Here, Michael and his former partner bought their property together but after splitting, Michael kept the £350,000 flat. He has a new partner, Lisa, and they have baby George and the family live in Michael’s flat. Lisa also owns her own property which she rents out.

Michael was keen to add Lisa to the mortgage and the title deeds of the flat so that it is considered their family home for estate planning reasons.

But by adding Lisa onto the mortgage and the deeds, this is technically buying a UK residential property while already owning an existing property.

Michael and Lisa were told that as the mortgage was £180,000, half the consideration (the part that is used to calculate stamp duty on transfers of equity), was £90,000, meaning they would need to pay £2,700 in stamp duty.

However, the couple decided on becoming ‘tenants in common’ rather than joint tenants so Lisa would own 20% and Michael would own 80%. This reduced Lisa’s chargeable consideration below the £40,000 stamp duty threshold, helping the couple avoid the tax altogether.

David Hannah, principle consultant and founder of stamp duty experts, Cornerstone, explains further: “No surcharge is due, provided the share of the partner was kept below £40,000 in value, as the property is mortgaged and Lisa is still assuming the value of the debt to be equal to her portion. Once the mortgage is repaid, the couple should re-evaluate ownership of the property to ease inheritance issues in the future.

“Even if the share were to be gifted to Lisa, as the property is mortgaged, her assumption of responsibility for a proportion of the mortgage debt is still classed as ‘consideration’ for the purposes of calculating SDLT. Therefore, the restriction of the share to below £40,000 would still be necessary to avoid incurring the surcharge.”

However, if Michael and Lisa were married in this scenario, then HM Revenue & Customs confirms no surcharge will apply. The law on the stamp duty surcharge was changed in the November 2017 Budget to disregard transactions involving ‘exchange of interests between spouses and civil partners’.

2) Brothers inherit property and one wants to buy the other out

Steven and Tom inherited an equal 50/50 share of their grandfather’s property. Here, the resulting tax charge depends on whether the brothers already own their own properties.

Hannah explains: “Should the brother buying out the other already own a residential property, his assumption of full ownership of a separate property (presumably valued above £40,000) would attract the surcharge.

“However, should the brother (buying the other one out) not own a separate property, this would not be the case. If the property is inherited jointly and a party inherits 50% or less of the value in the three years before they make a purchase of a separate residence for themselves, the surcharge will not apply.”

3) Sisters bought a home together but want to buy separately

Ellen and Claire bought their property over three years ago as first-time buyers. But during that time, Ellen’s got married and Claire is in a serious relationship.

Currently, Ellen and her husband live in the property while Claire has moved out to live with her partner.

They now want to sell the property and buy with their respective partners, both of whom are first-time buyers.

Hannah explains the situation: “If they sell the property before they buy their new respective properties with their partners, then the surcharge would not apply. If they sell the property after they purchase their new properties, the surcharge will apply on each of the onward purchases, and will be based on the purchase price of each property.

“They would each pay the regular SDLT due on the new purchase, plus an additional 3% surcharge on each banding of SDLT – 3% on the first £0 – £125,000 of the purchase price, 5% on the next £125,001 – £250,000, and so on.”

Source: Your Money