George Osborne announced a raft of changes in the Autumn Statement on 25th November – not just in relation to tax credits. Some of the changes will have a big impact on the residential property market. Read more to find out what these changes could mean for you – whether you are saving to buy your first home or are considering buying and developing a second property.
- The change to Stamp Duty Rates for second homes
Homeowners considering buying another property either to let or to live in, should know that they will be charged Stamp Duty at a higher rate (3% higher than current rate) on additional properties over £40,000 after 1st April 2016. This change will not affect purchases of caravans, mobile homes or houseboats, nor will it affect corporates or funds significantly investing in property. But it will impact on individuals. The money that is made from raising Stamp Duty on second homes will help to fund people who are buying their first property. If you have been thinking of becoming a landlord maybe it is worth considering acting now, before the new costs come into effect.
- The change to Stamp Duty payment time window
The government announced a consultation on changes to the Stamp Duty Land Tax (SDLT) filing and payment process. This would include a reduction in the time window from 30 to 14 days for these procedures from 2017 onwards.
- The change to Capital Gains Tax payment time window
The government are also planning on putting a time window on Capital Gains Tax (CGT) payments of 30 days following the completion of the disposal of the property. Again, there will be a consultation, but the indication is that this will start from April 2019 and will apply to all properties liable for CGT. For most residential property owners this will have no impact (as you will be eligible for Private Residence Relief) however for property investors this will be a big change. Currently CGT is not payable on a disposal of an asset until 31 January following the tax year in which a disposal is made. So a disposal made on the 6 April 2016 will not result in a tax bill until 31 January 2018.
- How will the changes affect first-time buyers?
One of the general changes the government will make is to double the housing budget from 2018, which will allow for an additional 400,000 affordable homes. Of these, 135,000 should be Help to Buy Shared Ownership homes by 2021. This is all very positive news for young, first-time buyers and will hopefully help them to get on the property ladder.
- Additions to the ‘Help to Buy’ Scheme
In addition to extending the availability of the current Help to Buy Equity loans to 2021, the government have announced that new schemes will be offered, including Help to Buy: Shared Ownership. From 2016 the plan is to lift restrictions on the current shared ownership criteria to allow people on lower incomes to get on to the property ladder. Specifically, those living in England with a household income of less than £80,000 (or £90,000 within London) will be eligible. They will be able to buy 25-75% shares of a home and the rent payments on the remainder of the house will be lower than 3% of the outstanding amount.
A similar system to the current Help to Buy will be created specifically for London from early 2016 onwards. The London Help to Buy scheme will offer equity loans of up to 40% (20% higher than the current general scheme) to young buyers who are able to contribute 5% of the property price. This will be a valuable scheme for those who may otherwise struggle to afford a property in the capital.
- 20% Discount on Starter Homes
The £2.3 billion which the government are to invest over the next five years in building 200,000 new Starter Homes will be given to builders to provide a 20% discount for first-time buyers under the age of 40, where the property value is under £250,000 (£450,000 in London).
- New right to Buy for Housing Association tenants
Under the current system, people living in council-owned housing have the right to be able to buy their home from the council. This right is now to be extended from the start of the new year to include people who are living in property owned by housing associations; some associations will even be piloting this before 2016.
- Watch out – Council Tax will be going up
When you’re making the decision on buying a property it is important to understand all of the associated costs to ensure that it really is affordable. Council tax is one of those costs. One of the changes announced in the Autumn statement was that local councils will have the authority to increase funding for social care via a new 2% council tax levy, which is something just to be aware of.
How can we help you?
We have already seen numerous clients making use of the Help to Buy Equity Loan scheme in the North East and in Yorkshire, as well as in other regions of the country. We are able to offer a competitively priced conveyancing service for properties and clients throughout England and Wales, and the necessary expertise to deal with a variety of Affordable Home schemes, including Help to Buy and Shared Ownership. We are also able to provide advice to property investors, whether on a small or large scale and whether you have experience in property investment or are starting out and thinking of buying your first investment property. If you are interested in finding out more information about these services, please contact us on 01642 233980.