Go to the Spencer Gordon website home page

Ainsdale Village, Southport

01704 570008

Twitter circle white small

By Spencer Gordon, Feb 18 2016 04:07PM

Chancellor George Osborne's imminent 3% stamp duty rise might be good for first time buyers, but what does it mean for property investors?

Jimmy King, board director at Pierce Chartered Accountants, explains: "As of 5 April 2016, the stamp duty rules are changing. Any purchase of a second property costing more than £40,000 will be subject to an additional 3% stamp duty, on top of any stamp duty already to be paid.

In addition, from 2017 onwards, the rules restricting tax relief on mortgage interest will be reduced from 40-45%, ultimately to 20%, squeezing the profits gained from any rental income.

The chancellor introduced these measures to support first time buyers, but what can you do if you want to invest in property for residential letting?

Window of opportunity

From now until April 5 2016 there will be no change in the stamp duty rise, so would-be investors could look at buying property quickly. Advise your agent and the seller that you are looking to complete before April 5 and ensure this is written into your contract.

If you do wish to invest quickly, look for properties with no chain or try buying a property at auction, where you will complete in 28 days.

Since the chancellor’s announcement in the autumn budget, there has been a measurable rise in the sale of one and two bed properties. Indeed The Royal Institution of Chartered Surveyors (RICS) reported an unusually buoyant December and suggests this is in part due to investors rushing to beat the stamp duty change.

However, this has been mirrored by an upward trend in prices – which is beginning to distort the market. You may find that the price you have paid for a property is not retained post April 5 and should take advice when looking to buy.

The benefits of using a company?

There is some hope for property investors, but it’s not a simple solution. Companies will not be subject to the restriction on relief for interest paid on loans to purchase residential properties for letting.

Purchasing property and operating as a landlord through a limited company may therefore be an attractive option post April 5.

Unfortunately, it’s not a perfect solution. If you wish to invest in more property, transferring existing property ownership from yourself to a limited company could incur capital gains tax (CGT); dependent on whether you are sat on profit or not (ie. has the property increased in value from the time you bought it).

For new property purchases post 5 April buying through a limited company should however be considered, but only if you don’t want to make a quick turnaround profit, as in these instances the annual CGT allowance available to individuals will prove very beneficial. If landlords however want to hold properties for long term capital growth operating through a company is now a more attractive option.

Even though this may be a possible solution, it’s a complicated area as access to finance in a limited company can prove more costly and can be very difficult to obtain. This issue may ease if enough people look to limited companies for property ownership as a future solution.

As this area is so complicated and each and every case will be different, investors looking to set up a limited company to buy and manage property should always seek independent financial advice.

Investing in regeneration

There is one area of the market where George Osborne’s increased stamp duty will not apply and that is the purchase of second properties that are worth £40k or less.

Will this mean that the buy-to-let landlord is the new social regenerator, investing in areas where there has been none and boosting up property markets in areas that are flat or still declining? That’s a distinct possibility.

By Spencer Gordon, May 13 2015 02:25PM

New research by Natwest Intermediary Solutions has revealed that confidence and optimism in the buy-to-let and new build markets are high amongst brokers.

500 mortgage intermediaries were surveyed by the lender with 58% confirming they had seen an increase in buy-to-let business in the last three months. Only 1 in 20 revealed that they had seen a drop and over a quarter (27%) said that it had remained static.

Looking forward to the next six months, it appears that the market still has room to grow with over half (54%) expecting to do more buy-to-let business than the last six months, with only 4% expecting to do less. A third (32%) are forecasting that their buy-to-let business will remain stable.

Turning to new build, well over half (57%) of brokers were optimistic about the prospects for the sector this year. Around a quarter (25%) were pessimistic with 1 in 6 (17%) saying they were unsure.

Of those that said they had a new build development in their area, the majority (57%) believe they will write more business this year compared to last year. A fifth (21%) said they weren’t sure whilst 16% thought they would do less. A third (32%) of all brokers in the survey said they didn’t have any new build developments in their area.

Graham Felstead, Head of NatWest Intermediary Solutions said: “The buy-to-let and new build sectors have both been touted as growth areas for 2015 and this sentiment has been echoed by the optimism shown by brokers in our survey. We have an appetite to grow our presence in both of these areas of the mortgage market, and have recently refreshed our New Build proposition to offer a more attractive approach to builder’s incentives.

The buy-to-let market is one where we have made great strides in the last couple of years. We have focused specifically on non-professional landlords with small portfolios – an area of the market where there has been significant growth and one that is expected to continue to be buoyant as more people turn to property as a viable investment alternative to traditional pension arrangements.”

Spencer Gordon Estate Agents Southport


Spencer Gordon Blog and News