A step into the unknown for buy-to-let clients and advisers

26 Apr 2016

When it comes to Budgets and Autumn Statements, it seems fair to say that the real interest is generated after they’ve been delivered, rather than at the event itself.

Without wanting to make a political rod for my own back, in future it may be a commonsense approach to run the text past the Cabinet before it is presented to the House of Commons, to avoid an overwhelmingly negative reaction. But, what do I know?

I’m sure the political fall out will go on for some time and the machinations currently taking place within the Conservative party appear to make House of Cards look more like House of Fools (a Vic Reeves/Bob Mortimer sitcom for those not in the know). However, what will changes set out in the Budget actually mean to mortgage advisers on the front line?

The big talking point pre-and post-Budget has obviously been the Stamp Duty changes for additional properties, and there was certainly a sting in the tail provided by George Osborne here for ‘larger investors’. The arbitrary 15-property rule was jettisoned completely meaning every single purchase of a non-main residence property will pay the extra 3% charge.

It certainly won’t have gone down well with the corporate property brigade however, if there are to be such changes to Stamp Duty, it does actually seem like a step in the right direction in terms of fairness. After all, why should individual landlords have to pay the extra when large corporates were going to be let off?

At present, the big unknown is what might happen to advisers’ buy-to-let clients post-April. Undoubtedly, as shown by recent lending figures, many purchasers have sought to beat the Stamp Duty deadline, but what happens now? Will there be a significant tail-off in buy-to-let transactions or will we simply see a ‘taking stock’ approach followed by a return to a somewhat changed new normal? From our perspective, we do not see any significant drop in the demand for buy-to-let property purchasing, although given many purchases have been pulled forward so to speak, the levels reached in recent months will probably take quite a while to be reached again.

Of course, there is an ongoing job for advisers not just around developing client understanding in terms of the new rules, but also helping them to work out whether they are liable for the increase in Stamp Duty or not. Advisers are likely to find any number of different scenarios whereby purchasers might feel they are not liable, however it will do no one any good if the client attempts to chance their arm only to be caught out by HM Revenue and Customs.

Better for all concerned that there is an upfront discussion of the purchase and how it might sit within the new rules, especially when looking at areas like holiday homes, time spent between two different residences, and also those who might own/or once have owned but now live in rented accommodation. For those advisers in any doubt about how the rules affect a client, I would refer them to a very comprehensive list of potential scenarios laid out by the government.

We’ve already heard from the conveyancing profession about how it is pleased it is not being forced into a policeman role when it comes to determining whether a client is liable for the extra cost. While it’s important advisers are not in a similar position, there is a care of duty here to set out an initial understanding for clients before they embark on a purchase. At least from this point they should be fully aware of the potential for extra costs and can plan accordingly.

Bob Hunt

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