The New Stamp Duty Rates and Commercial Property 2016

Chancellor George Osborne has recently announced new stamp duty rates for commercial property in the UK that come into force from the 17th of March 2016. The change is said to help approximately 90% of small businesses in the UK and set to raise £500 million a year. (1)

percentStamp duty has been a heated topic for UK landlords over the past couple of months after the Chancellor proposed a rise in the existing thresholds back in November. The rise, if it is to go ahead, would have a financial impact on many buy-to-let landlords, leaving them significantly out of pocket for their next investment. However, the proposal was set to help to raise almost a billion pounds by 2021 for local communities who are currently being priced out of the market.

To recap here is what Mr Osborne has proposed: (2)

Property Price

Current Rate

April 2016

Up to £125,000

0%

3%

£125,000 – £250,000

2%

5%

£250,000- £925,000

5%

8%

£925,000 – £1.5million

10%

13%

Over £1.5million

12%

15%

The possibility that investing in a buy-to-let property would cost a landlord significantly more after April 2016, has triggered a stampede of investors, all eagerly snapping up investments before the rates increase.New Stamp Duty Rates Good News for Commercial InvestorsAccording to Chancellor George Osborne’s Budget 2016, new rates to UK stamp duty for commercial property will apply but they are not as bad as first thought. You will now be taxed 0% on the portion of the property up to £150,000; 2% between £150,000 and £250,000 and 5% above the £250,000 mark. Commercial buildings under the one million pound mark will also cost a lot less in stamp duty tax, making them an attractive investment for property investors. (3)

Commercial Property Price

Old Stamp Duty Rates

Value up to £125,000

0%

£125,000-£250,000

1%

£250,000- £500,000

3%

£500,000 - £925,000

4%

Commercial Property Price Breakdown

New Stamp Duty Rates

Up to £150,000

0%

£150,001 to £250,000

2%

£250,000 and above

5%

The above stamp duty tax thresholds apply to UK commercial property such as coffee shops, offices, agricultural land or six or more residential properties bought at the same time in a single transaction. (4)

In addition, limited companies will still be able to allow landlords to offset mortgage interest against the rent. Commercial property owners will be theoretically able to move a property that is registered in their name over to a corporation, in order to refer any capital gains tax. Moreover, business rates will also be reduced especially for smaller businesses that are working from such commercial properties. All good news for those interested in investing in commercial property.

Capital gains tax will also be significantly reduced for all commercial properties. The previous rate of 18-28% will be reduced to 10-20%. This is fundamentally important for those who either own or are looking to sell their commercial property. (5)

Residential Property Investors Still Waiting

According to the latest figures from the Council of Mortgage Lenders, there was a 22 percent surge in the number of home purchase loans issued to prospective private landlords in January. The total amount borrowed also increased to £1.4 billion according to The Guardian. (6) These figures highlight the rise in the number of buy-to-let landlords entering this crowded marketplace.

Unfortunately, 3 percent extra stamp duty exemption when purchasing 15 properties or more, will no longer exist, according to Mr Osborne. The Chancellor has rejected the initial proposal that would have meant significant property investors, companies and individuals, purchasing more than 15 properties would be able to easily avoid the tax hike. However, there are still ways that you could bypass the rise in stamp duty that may still apply. We pointed out a couple of ideas you could take up in our previous article, Stamp Duty Legal Loopholes.

For the vast amount of residential landlords in the UK, it is undoubtedly going to be an anxious wait until we finally hear whether the stamp duty rates, announced in the Autumn Statement back in November, will be enforced or not. Until then, landlords will inevitably flock to snap up residential investment opportunities to beat the system, so to speak.

As soon as we hear anything about the new residential threshold for Stamp Duty we will inform you. For more information about investing in property in Greater Manchester please don’t hesitate to contact our team of experts on info@heatongroup.co.uk

Sources

  1. GOV UK - Budget 2016

2. GOV UK - Budget 2016

3. The Heaton Group - Autumn Statement

4. Ross Martin - Stamp Duty

5. Independent - Budget 2016

6. The Week - Buy to Let Sector

Icons made by Freepik from www.flaticon.com is licensed by CC 3.0 BY

 


Enquiry Form


Articles similar to this