What The New Stamp Duty Tax Will Mean For You
People in the UK looking to buy a second home already have a lot of uncertainty in their future, with Brexit leaving people unsure of how property investment will be impacted. The depreciation of the pound may be good news for investors looking to buy, and international buyers from the Middle East and Hong Kong are already lining up to assess and take advantage of decreased residential property values. We may see a period of rapid buying and selling in the London markets, though some local landlords will undoubtedly wait out the volatility. However, corporate investment could be stalled until new trade agreements have been ironed out.
One thing that isn’t uncertain is the new Stamp Duty increase. People might have hoped that it was an April Fool’s joke, but the new Stamp Duty increase that started on April 1st, 2016, is here to stay. This three per cent addition onto existing stamp duty rates affects anyone who is buying an additional residential property. This includes an additional property that you only own a share in! However, it does not apply to someone who is replacing their main residence, i.e., someone who has sold or gifted their previous residence and is now purchasing a new one.
The new tax has you pay three per cent of the entire purchase of the property—and that’s on top of the regular Stamp Duty. Say goodbye to the thousands of pounds you’ll be sending off to the government! The sting of the new Stamp Duty increase has somewhat lessened for foreign investors in light of the pound’s depreciation. But for UK buyers, the new Stamp Duty is yet another tax in a difficult financial time that may yet worsen.
The risk of being subjected to the new Stamp Duty increase isn’t the only one in property investment. If you’re just starting out, remember that organisation is key:
A good way to keep track of all your investment ideas, blueprints and information is to keep it in a separate organised portfolio or file. You don’t need to take the risk of losing information or account papers that are critical to your investment.
The other risk in all of this is what you’re investing in. Are you going to be making more off of your investment or are you going to be losing money? When you’re calculating your investment, be sure to take into account all of the tax rates as well as the initial asking price for the property.
Investing in something that is a higher risk can be exciting and fun, but the property you’re getting out of it could be more than the risk is worth. What types of returns are you going to get from it?
There is this Intensive Property Investing course from Rick Otton that I’ve attended and the event tackles a lot about cash flow. An important point made in the course was having an “exit strategy” where you know exactly how you will be profiting from your investment. That is something every investor should keep in mind when deciding whether or not to invest on a new property.
Taxes and other obligations will always be there. But at the end of the day, it’s the ROI that will determine whether or not your investment was a good one.