Yesterday was either April Fools’ Day if following the Gregorian calendar, or the first day of the New Year if stuck in a 1582 time warp and clinging to the Julian calendar. Either way, 1 April ushered in a “whole new world” according to various parts of the popular press, as Chancellor Gideon saw the first day of his “draconian measures” being implemented that cover the buying and selling of property. The Big G (him, not me), has actually been rather sneaky (some may read it as ‘cute’ and I don’t mean that in the sense of fluffy bunnies/puppies/kittens/cheerleaders); as the new rates of SDLT and the ’15 house’ rule are for those buying 15 houses in the same transaction, not as was initially announced, for anyone owning 15 or more properties. So who, in practical terms, is exempt? Statistically, no one. When the Chancellor announced the proposed changes last year together with reduction in higher rate tax allowance for buy to let, he gave every large higher rate tax payer notice to get their affairs in order; i.e. get all properties into a limited company. As we have said before, any higher rate taxpayer with a substantial portfolio who had not gone down the limited route should have been looking for a new accountant. If such tax payers adapted their affairs prior to 1 April 2016, then yes, of course there would be some stamp duty to pay, but considerably less than the rates in force from 1 April. Also, corporation tax is now 20% – very attractive to higher rate taxpayers – and of course should the limited company dispose of one of its assets there are a myriad of allowances/off setting/delaying tactics that can be employed before a penny of corporation tax is handed over. In our opinion, no harm done by G to any of the big hitters. Well played there my friend.
As was to be expected, the trade press is wallowing in misery because of the “end” of buy to let and industry professionals having to put the brochure for the high end sports car/holiday/girlfriend back in the drawer. The diary at Cheshire & Co is as full this week as it has been all year. The ‘effect’ of the new changes was in evidence when a buyer who had agreed to buy a property some time ago chose very recently to change lender. He will not complete until this week, thereby incurring additional stamp duty to that which he would have paid had he completed prior to 1 April. When asking him how he felt about the additional cost (£2250), he said that he viewed it as, “an interest free loan over the next 3 years.” Having sought further explanation of his rather sanguine response, he said, “I will simply charge £15 a week more in rent and the tenant will pay the stamp duty”. Fair enough. So G, how exactly do you see the reforms bringing control to the housing market and thus helping those renting to get on the housing ladder? Nothing changes. Not even if one chooses to believe the results of a recent poll in the International Business Times that reported earnestly that almost a fifth of landlords in London ‘planned’ to sell up because of G’s tax hikes on the buy to let sector. For those of you who may be interested, I am planning to give Miss Minogue a call tonight…
Whilst some reports have indicated that some landlords plan to sell up, several data reports show an increase in activity in the buy to let sector ahead of April 2016 as investors rushed to beat the stamp duty rise. Should a report be published at the end of 2016, here at Cheshire & Co we predict that there will be no dramatic drop in the number of buy to let properties. Firstly, because of the activity prior to 1 April and secondly, because if any buy to let properties do come on the market, have a guess who will be circulating like vultures? Correct: other buy to let investors.
For all the furore, there does not appear to be-from where we are sitting-any major changes to the dynamic of the buy to let market. Neither is there any substantial additional help for those tenants wanting to purchase a property. Nothing changes then… Does anyone have the dialing code for Australia?