“A pound saved is worth two pounds earned – after taxes” is what my Grandfather used to say. He loved his irony, yet was always a wise man, and it is tax I want to talk about today, in particular, property taxation – Stamp Duty in fact.
Apart from some minor exemptions, Stamp Duty is paid by anyone buying a property over £125,000 in the UK. It presently raises £10.68bn a year for the HM Treasury (compared to with £27.6bn in fuel duty, £10.69bn in alcohol duty and £9.48bn in tobacco duty).
In the latest set of data from HMRC, in the MP constituency that covers Colchester, property buyers paid £6m stamp duty in one year alone which is a lot of money, although this figure is dwarfed by the £230m Colcestrians paid in income tax over the same period.
As you may be aware, from 1st April 2016, George Osborne introduced an additional tax for landlords adding an additional 3% stamp duty surcharge on top of the standard stamp duty rate when purchasing a buy to let property. There were tales of woe and Armageddon, including a Deutsche Bank report, suggesting the new surcharge could lead to house prices falling by as much as 20%.
HMRC data released in the Summer for Quarter 2 (Q2) of 2016 did seem to back up those fears as they published some worrying figures; only one in seven properties purchased was a second home or buy-to-let (only 30,300 of the 207,900 properties sold in Q2 2016 were bought by landlords).
In other articles, I have talked about the slump of property transactions after the 1st April as landlords rushed to complete property purchases before the April deadline. Of the £1.976bn raised in Stamp Duty from residential property sales in Q2 2016 £652m was paid by buy to let landlords. £424m in ‘normal’ stamp duty and £228m from the additional 3% surcharge.
Looking at Q3, the numbers are significantly higher. Of the 235,000 property sales, nearly one in four of them (56,100 sales) were bought by buy to let landlords raising £2.208bn in stamp duty. £864m in ‘normal’ stamp duty by BTL landlords and £442m paid by those same landlords in the additional stamp duty surcharge. This suggests buy to let investors have not been deterred by the stamp duty surcharge introduced in April this year. The Q3 2016 figures also show:
- 65.4% of buy to let purchases cost less than £250,000
- 23.7% of properties were in the £250k to £500k range
- 10.9% (or 6,100 additional properties) of buy to let properties bought cost over £500k
- 22.2% (approaching one in four) of £500k properties were buy to let properties.
This suggests the Q2 2016 figures were artificially low as investors rushed to complete purchases before the 3% supplement was introduced but in Q3 2016 the number of buy to let properties purchased increased by 85%. Once again demonstrating you shouldn’t take everything you read in the media at face value. I can assure you the Colchester property market is doing just fine.
If you’d like a second opinion on an investment property you are considering or would just like an informal chat about any aspect of Colchester properties in general please feel free to call me on 01206 862288 or email email@example.com – I’m happy to provide free feedback without obligation.
If you send me the hyperlink to the property from Rightmove or Zoopla I will usually respond within 24 hours. I am also happy to undertake free pre-purchase visits to your shortlist of potential properties to provide a rental valuation.