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Buy to let investors cancel property plans as stamp duty surcharge looms

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Written by: Paloma Kubiak
18/02/2016
One in 10 UK adults have abandoned plans to invest in buy-to-let property following the government’s move to clamp down on the sector.

New research reveals that 9% of potential buy-to-let investors have cancelled their plans while one in seven (14%) existing landlords said they would sell one or more properties as a result of the new rules.

From 1 April, anyone buying a second residential home or buy-to-let property will pay an additional 3% stamp duty surcharge.

As the current average cost of a property in England and Wales is £188,270 according to the Land Registry House Price Index, anyone completing their purchase from 1 April will be subject to a stamp duty bill of £1,265.

For more expensive properties, the stamp duty on buying a £250,000 BTL will rise from £2,500 to £10,000 from April, while that for a £400,000 property will more than double from £10,000 to £22,000. See our Buy to let tax changes explained for more information on how this will impact you.

BTL savings moved to pensions and ISAs

Online investment platform, rplan.co.uk, also found that that those who did plan to invest in BTL would have used savings worth an average of £43,592 and now instead, 39% will use the money to save in a cash account.

Nearly a third (30%) will invest in an ISA, 20% will put the money into their pension and 13% will invest it in the stockmarket.

However, latest figures in the Bank of England’s credit conditions survey have revealed a rush to buy BTL properties before the new tax is introduced.

Lenders reported that demand for secured lending for house purchases increased slightly in the fourth quarter of 2015 and was expected to increase in the first quarter of 2016, but within this, demand for buy-to-let lending increased significantly in the fourth quarter.

Faith in property as an investment

Stuart Dyer, rplan.co.uk’s CIO, said: “The British have strong faith in property as an investment and many see it as a means of providing a pension income. But the government clearly has a policy to dis-incentivise BTL and the sharp increase in landlord mortgages revealed by the Bank of England credit survey will probably be a last rush before the gate slams shut.

“Having a BTL property can also mean an over-exposure to one asset class for many investors, who should strongly consider the alternative of investing in a diversified portfolio for the long term, especially if this can be achieved through a tax-free ISA wrapper.”

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