Chancellor George Osborne caused momentary panic yesterday, when unveiling his 2014 budget plan.
Under the new proposals, any residential property being purchased through a company for more than £500,000 will attract a new 15% stamp duty liability.
Understandably, this left many Contractors pondering the implications of buying property whilst working through a limited company.
“Thankfully this new level of stamp duty is solely aimed at those companies who purchase property within corporate envelopes to avoid stamp duty” said Taj Kang, Business Development Director at Contractor Mortgages Made Easy.
“For those Contractors who work through their own limited company, this will not become an issue as any mortgage borrowing that we are able to secure is to you as a Contractor and on your contract value, rather than lending to the company itself.”
“This new idea is primarily aimed at those companies who would buy property within the business itself, often taking on commercial mortgages, in order to avoid stamp duty altogether.”
This should, suggests Charles Haresnape, managing director of Aldermore Bank’s residential mortgages arm, be considered a positive move.
“Don’t expect the overheating London property market to miss a beat, but these new measures may encourage developers to sell more properties to UK buyers rather than overseas investors.”
Alongside the extension of the Help to Buy scheme aimed at new build properties, this can be seen as a positive budget for Contractors looking to get on the property ladder. This does however, carry a caveat, suggests Taj Kang.
“Whilst this is promising news that suggests the economy is on the up, it simply cannot be ignored that the Mortgage Market Review is just around the corner, and with rates increasing steadily all of the time, in reality the Help to Buy scheme may not actually last until 2020.”
“I’d suggest looking at things now rather than later, to ensure that you don’t miss out. It also reinforces the need to speak with a specialist broker, as the likelihood is that with MMR on the horizon, lenders will struggle to assess contractor cases correctly using their direct network.”
Article By: Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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