The Property Ombudsman

Budget 2020: The effects on property investors

This week the new Chancellor, Rishi Sunak, published his first government budget in the House of Commons announcing this years tax and spending plans. He has been in the role for less than a month but has made changes to the budget which could alter the property sector for years to come with increased Stamp Duty taxes.

It has been decided that there will be an additional 2% surcharge on top of standard Stamp Duty rates for non UK residents buying residential property across England and Northern Ireland. This rate is increased by an additional 3% if they do not intend to occupy the property themselves – totalling a huge 5% above the standard rate.

While this law directly affects overseas buyers it also has it’s affects on the UK. This additional cost is expected to affect 70,000 of the Uk’s total 1.2 million annual property transactions. While the impact here will mostly be felt in London - due to this being the most international market in the UK – inevitably the effects will be felt across England.

Stamp duty rates in England and Northern Ireland

Property prices

% interest rates

Up to £125,000

0%

£215,001 - £250,000

2%

£250,001 - £925,000

5%

£925,001 – £1.5m

10%

 

Stamp Duty Land Tax is currently paid on properties with more than £125,000 with rates varying dependent on whether you’re a first-time buyer, if you’re moving home or buying a second property and the location of where you are buying. Last year this form of tax raised nearly £12 billion, however, given that foreign buyers of the most expensive properties could be paying as much as 17% SDLT on any property over £1.5 million, it is anticipated that we will see a decrease in investors and therefore tax raised. In recent years, the falling pound has allowed for more affordable investments for overseas buyers, but this tax will bring them into a similar playing field as UK buyers.

The Bank of England has also cut its base rate from 0.75% to 0.25% - the largest rate decrease since the 2008 financial crisis. This is the rate of interest is set for the banks to charge all borrowers and what banks pay you for saving money with them. The cut is said to have been put in place to help counteract the economic changes caused by the Coronavirus and is fantastic news for anyone looking to borrow money for property investment.

While the rates fluctuate and are reviewed by the bank every 6 weeks, the base rate hasn’t been this low since the last decrease in August 2016 which lasted just over a year. That being said, money sat in banks at this moment is seeing even smaller returns and so you would be wise to invest it rather than let it sit in the bank, somewhat stagnant in interest.

Equally, with many new developments in place across the country, exciting projects in the pipeline and beautiful builds ready to go, time is of the essence when it comes to taking advantage of the banks decrease in interest rates and cheap lending.

 

Essentially, while it is crucial for overseas buyers to deploy cash into the UK buy to let market before April 2021, this is a fantastic time for buyers to lend money from banks for their next property investment and we are here to help. Whether you’re a first time buyer or a seasoned investor, give us a call today on 0800 011 2277 and we can find you an investment which will generate income from day one.

 

For more information on Budget 2020 and how it could affect you and your property investments, click here.

For more information on investing in buy to let property, call our team today on 0800 011 2277

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