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Thu 26 Nov 2015 04:04 PM

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UK stamp duty hike 'unlikely' to deter expat investors

Chancellor adds 3% tax surcharge to purchase of buy-to-let properties in UK

UK stamp duty hike 'unlikely' to deter expat investors
London is one of the most targeted cities by cross-border real estate investors.

The UK government has announced a 3 percent surchage on buy-to-let properties and second homes but experts claim this is unlikely to deter British expats from investing in property back home.

UK chancellor George Osborne announced the stamp duty land tax (SDLT) as he unveiled the Autumn Statement on Wednesday, setting out budget plans for the year ahead.

Under the plans, an extra 3 percent of stamp duty will be added on purchases of “additional rental properties”, such as buy-to-let investment properties and second homes.

The changes will take effect from 1 April 2016 and are expected to help the government raise about £1 billion ($1.5 billion).

SDLT is currently charged on properties according to different ‘bands’ based on their sales value.

The new surcharge will lift each band by 3 percent. The BBC said this means that for properties worth between £125,000 and £250,000 – where the stamp duty requirement is 2 percent – buy-to-let landlords will pay 5 percent under the new rules.

For the average buy-to-let purchase of £184,000, that means they will pay an extra £5,520.

Commercial property investors with more than 15 properties are expected to be exempt from the new charges, according to the BBC.

UK landlords complained that the changes would stifle investment, but the additional tax is not expected to dramatically affect investment in buy-to-let UK properties by British expats living in the UAE or elsewhere.

Jim Coupe, managing director at offshore account and mortage advisor Skipton International, told Arabian Business: “While this is clearly not a welcome decision, most expat investors view UK property as a long term investment and hence a 3 percent rise over the lifetime of a property should be seen in that context.”

Coupe added: “Some UK property experts are suggesting that this increase could result in higher future rents as landlords pass on increased stamp duty costs to tenants. There is also the possibility rents may rise if the number of investors in UK property drops.

“Despite the move, property in the UK is regarded by many as a very attractive, secure investment and we do not foresee a rise in stamp duty deterring the majority of investors.”

Skipton advises hundreds of expats across the world, including in the UAE, and last year launched a package of buy-to-let mortgages tailored specifically for British expats.

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