The reason people purchase properties is return on investment.

As of April 2016, any properties that are over and above £40k are charged at 3% over the existing stamp duty rate, this is retrospective to zero. This means a house at £40,001 would cost £1200.03 under the new changes.

This will have an impact on the South East and Overpriced “bubble markets” such as Manchester – but mean a lot of Investors will divert attention to the North East for high yielding, lower entry price level properties.

Band Normal Rate Additional Property*
Less than £125k 0% 3%**
£125k to £250k 2% 5%
£250k to £925k 5% 8%
£925k to £1.5m 10% 13%
Rest over £1.5m 12% 15%

* Higher stamp duty rates for additional property from April 2016.** For additional property, the first £40k will attract 0% tax. From £40k to £125k the rate will be 3% on full purchase.

The vast majority of the properties clients purchase in the North East are priced at £50-110k (new Stamp Duty working out at £1500 – £3300 respectively).

Therefore a few points to consider:

  1. Stamp Duty is a cost of purchase and can be deducted in part from your capital gains tax bill (not all of it) when you come to sell the property as a cost transaction. (Always recommended that you speak to your accountant).

  2. The reason why people invest in Buy to Let is to make a return… and in my opinion this extra amount will lead to a rent rise – Instead of receiving £425 per month on a £50k property… if you receive £435, this equates to the same return on investment including the stamp duty cost at £1500 (at a yield of 8%).

  3. Where possible, from April next year, we will negotiate to have the cost of Stamp Duty reduced from the purchase price.

  4. Finally invest in the North. A London property priced at £450,000 will cost £26k to a new landlord in Stamp Duty, yet 7 x £64,285 properties will only cost £13,500, not only almost £13k saving on Stamp Duty but more than likely a much more impressive yield.

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