The extra 3% Stamp Duty charge to buyers of buy-to-let properties and second homes has come under attack, as the consultation on the proposal comes to an end.
A consumer group, the HomeOwners Alliance, says the additional tax will bring “massive unintended consequences”.
Today, the official consultation on the extra Stamp Duty ends, after just seven weeks.
If the charge is approved, it will apply from 1st April this year.
The HomeOwners Alliance calls the measure “dangerously flawed” and insists the Government goes “back to the drawing board”.
It says it supports the charge on second homes, but believes the way the Government plans to introduce the surcharge is “overly complex and flawed”.
The group is especially concerned over the surcharge’s 18-month window; those buying a new home before selling their first must pay the extra 3% Stamp Duty, then, they have an 18-month window to sell their first home in order to receive a refund.
If they do not sell within 18 months, they lose the right to a refund.
The policy would also affect people relocating, for example for work, and who might normally rent out their first home while buying in a new area. If they do this, they must pay the surcharge.
Extra 3% Stamp Duty Charge Comes Under Attack
The Chief Executive of the HomeOwners Alliance, Paula Higgins, states: “It is great the Government is trying to use Stamp Duty to help homeowners, but they have made a real hash of it.
“The ridiculously complex way they are planning to introduce the scheme will end up harming many of the very homeowners it is meant to help, and lead to widespread confusion among homebuyers.”
She continues: “We are already being contacted by distressed homeowners who have worked out they will be caught by it and not be able to buy the home they want to.
“Rather than push ahead with a well-intentioned but dangerously flawed scheme, it should go back to the drawing board and put it right.”1
Meanwhile, the Intermediary Mortgage Lenders Association’s Peter Williams has criticised the short consultation period, which is too short by the Government’s criteria.
He believes the Government has “no view about how this tax will impact on the market as a whole, let alone the buy-to-let market.”
He says that buyers will eventually be able to absorb the extra tax, but it will push rent prices even higher.
“It doesn’t seem at all sensible,”1 he adds.
Furthermore, the Council of Mortgage Lenders (CML) has also voiced its concerns.
Paul Smee, the CML’s Director General, says: “There is a risk of overkill in dampening investor sentiment to the extent that the flow of available private rented property could be disrupted, without any necessarily corresponding increase in the ability of households to become homeowners.
“In addition, with around a fifth of households currently renting in the private sector, there is the perverse risk that the SDLT increase could cause landlords to charge higher rents, and so actually make it harder for tenants who want to buy to save the deposit needed to do so.
“We urge the Government at least to move away from a position where people will have to pay and then potentially claim back to one where payment is deferred, and only triggered if the buyer genuinely falls into the intended target category.”1
For further information about landlord finances, here is a round up of forthcoming changes to buy-to-let: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/
1 http://www.propertyindustryeye.com/stamp-duty-surcharge-comes-under-savage-attack-ministers-told-to-turn-back/
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