North East Mortgages - Mortgage Brokers & Protection Advisers
Taxation of Buy to Let / Second homes from April 2016
Stamp Duty is paid by everyone who purchases a property over £125,000, including overseas buyers. From April 2016, property buyers purchasing a new Buy to Let or Second Home in excess of a property value of £40,000, in England, Wales and Northern Ireland will have to pay an additional 3% on each Stamp Duty Land Tax Band, as shown in the table below.
Stamp Duty Land Tax
| Property value | Standard Rate | Buy to Let / Second home rate from April 2016 |
| Up to £125,000 | 0% | 3% |
| £125,001 - £250,000 | 2% | 5% |
| £250,001 - £925,000 | 5% | 8% |
| £925,001 - £1.5m | 10% | 13% |
| Over £1.5m | 12% | 15% |
To give examples of what will be payable to HMRC on the purchase of a Buy to Let or Second home from April 2016:
- Property purchased for £100,000 will attract Stamp Duty of £3000 (3% of £100k)
- Property purchased for £150,000 will attract Stamp Duty of £5000 (3% to £125k then 5% on £25k)
- Property purchased for £300,000 will attract Stamp Duty of £14,000 (3% to £125k is £3,750, 5% on next £125k is £6250 and 8% on £50k is £4000)
Other Changes
Under the changes announced in the Chancellors' Autumn Statement of 2015, landlords will not be able to deduct mortgage interest from rental income before it is assessed for tax, but will instead get a flat rate 20% tax credit. Those paying higher rate tax will lose half of their relief, while some basic rate tax payers will be moved up into a higher tax bracket. Please note that most basic rate tax payers will be unaffected.
Tax Year 2016 / 2017
As stated above an extra 3 percentage points will be added to Stamp Duty Land Tax rates for Buy to Let and Second property transactions.
For furnished properties, wear and tear allowance is abolished, with landlords being able to claim actual expenditure on new or replacement items.
Tax Year 2017 / 2018
25% of the mortgage interest will be added back to the rental profit and the tax calculated, according to the tax bracket the landlord falls into. either:
- 20% (Basic Rate)
- 40% (Higher Rate)
- 45% (Additional Rate)
A deduction of 20% of the interest that has been disallowed will be taken from the tax payable.
Tax Year 2018 / 2019
50% of the mortgage interest will be added back to the rental profit and the tax calculated, according to the tax bracket the landlord falls into.
A deduction of 20% of the interest that has been disallowed will be taken from the tax payable.
Tax Year 2019 / 2020
75% of the mortgage interest will be added back to the rental profit and the tax calculated, according to the tax bracket the landlord falls into.
A deduction of 20% of the interest that has been disallowed will be taken from the tax payable.
In April 2019 a payment on account of any capital gains tax due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal.
Tax Year 2020 / 2021
100% of the mortgage interest will be added back to the rental profit and the tax calculated, according to the tax bracket the landlord falls into.
A deduction of 20% of the interest that has been disallowed will be taken from the tax payable.
North East Mortgages
31 Prensgarth Way
South Shields
NE34 9HD
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