A lot of changes have happened over the past 2 months in terms of Government leadership and the ‘mini Budget’.
At the end of September, Kwasi Kwarteng implemented a number of tax cuts in his first fiscal address as chancellor, which was dubbed a mini-Budget. One of these tax cuts included changes to stamp duty rates for buyers in England and Northern Ireland.
Despite Kwarteng having resigned, and many of the proposed changes have now been scrapped, the points outline below still stand.
Here, Belvoir summarises the findings and their implications for landlords.
A Summary of the Main Points:
- Reduced Stamp Duty results in 200,000 fewer people paying the tax on home purchases, however limited firms are exempt from this change.
1. Stamp Duty Changes
As he delivered his mini-Budget to the Commons, the (now ex) Chancellor Kwarteng stated that home ownership is the most popular way for individuals to own an asset, giving them a role in the development of our economy and society.
He continued to explain that “This is a permanent reduction in stamp duty, effective immediately,”
In addition, the barrier for first-time purchasers has been raised from £300,000 to £425,000. The tax threshold, which was previously set at £125,000, has been raised to £250,000.
According to Kwarteng, this modification should completely exclude 200,000 people from paying stamp tax.
To summarise – the new tax duty bands are as follows:
| Stamp duty tax bands from 23 Sept 2022 | Normal rate | First-time buyers | Rate |
| Up to £250,000 | 0% | Up to £425,000 | 0% |
| £250,001 to £925,000 | 5% | £425,001 to £625,000 | 5% |
| £925,001 to £1.5 million | 10% | Homes priced above £625,000 | Normal rates apply |
| Over £1.5 million | 12% |
So what does this mean for landlords?
Given the lack of availability in the rental market, this might persuade a landlord to make a purchase they might not have otherwise considered.
For the time being, some landlords will be encouraged by the possible stamp duty savings they will experience and may even think about locking in their interest-only mortgage for a longer length of time.
Investing in real estate, which has been a fairly stable asset class delivering strong returns in recent years, could be a prudent choice at a time when the economic situation appears uncertain. Demand continues to outweigh supply, making this a good time to be a landlord.
Final thoughts:
Landlords are expected to continue to evaluate and streamline their portfolios in this market, which might help the exchequer generate more capital gains tax (CGT) money. If the government is to provide landlords a stronger sense of support, more measures are likely to be required.
Contact your local Belvoir branch to discuss the topics covered in this article or to discuss your specific situation.
