The unpopular ‘landlord tax’, which saw a 3% surcharge on the stamp duty paid on additional homes, such as buy-to-lets, has already raised about £2 billion for the Treasury. HM Revenue & Customs’ figures to July 31 show the number of property transactions was 1,204,730, which is about the same as in the same six-month period in 2015. However, the increased tax on additional homes has meant the stamp duty land tax has gone up by 20% in the same period, equivalent to £2 billion, according to analysis by accountants Blick Rothenberg.
Blick Rothenberg director, Robert Pullen, said some of the increase could be due to the increase in property prices. He thought it was likely that the majority related to the 3% surcharge on second homes or buy-to-let properties. He said the policy was introduced to make it fairer for first-time buyers, but it is becoming clear that it has only succeeded in generating more tax for HMRC. He urged the government to consider whether the levy is making the property market fairer or creating more problems than it solves. Whilst the tax brings in healthy revenue for the government, though,it seems unlikely that they will want to lose this source.
On the other hand, the new tax has been cited as one reason why fewer amateur landlords are investing in buy-to-lets. Mortgage activity is rising, with gross mortgage lending standing at £21.9 billion in July, which is above the £20.5 billion average of the past 12 months. House purchase approvals were 41,587 in July, which is 9% above the total for the same month last year. First-time buyers and people remortgaging have primarily supported the housing market recently, because interest rates remain at record lows. However, there has been a dip in activity in the buy-to-let sector, particularly among amateur landlords.
Buy-to-let specialist Landbay’s co-founder and chief executive officer, John Goodall, said the residential market is very active, while the buy-to-let is in a state of steady growth. He believes the buy-to-let tax changes and new underwriting criteria have deterred some amateur landlords, but professional landlords are filling the gap at the same pace. Activity in buy-to-let mortgages or remortgages could rise as landlords review their borrowing ahead of PRA changes to underwriting rules, which take effect on September 30. From that date, lenders will have to use additional affordability tests on landlords who have a portfolio of four or more mortgaged properties.