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Is Residential Investment Property Taxed Too Much?

View profile for Andrew Beattie
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Following the recent budget it is now clear that there will be no relief from higher rates of residential SDLT (Stamp Duty Land Tax) available for institutional investors. This is leading many parties to think that residential investment property is now being taxed too heavily.

The government announced in the 2015 Autumn Statement that higher rates of SDLT would apply to the acquisition of residential property on or after 1 April 2016 where the acquisition was by an individual purchaser who owns more than one property.

Following the budget it is now clear that the higher rates of SDLT which apply to individuals will also apply to non-individual purchasers purchasing residential property.

In consultation before the budget, the government confirmed it was considering an exemption from the higher rates for those making "significant investments" in residential property, given the importance such investors play in supporting the government's housing agenda. The government gave the example of the acquisition of a bulk purchase of at least fifteen properties as potentially qualifying for exemption from the higher rates.

In response to this, the property industry and in particular the British Property Federation, lobbied for a relief for institutional investors. Although it was thought prior to the budget that such relief would be given it is now clear that it will not.

The higher rates of SDLT in respect of additional residential properties follow measures introduced by the government that increase the taxation of residential property including;

  • higher rates of SDLT for acquisitions by non-natural persons;
  • the annual tax on enveloped dwellings; and
  • non-resident capital gains tax.

Whilst the government recognised the importance of providing relief from those measures for institutional investors, it has chosen not to follow the same approach with regards to SDLT.

It remains to be seen whether this change will significantly impact the UK residential market. If it does, many commentators believe that the government may have exacerbated the housing crisis rather than ease it.

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