At the beginning of July, Chancellor Rishi Sunak raised the initial stamp duty threshold from £125,000 to £500,000 with immediate effect. This stamp duty ‘holiday’ will be in place until 31 March 2021.
With all the changes that have affected the private rented sector in recent years, plus increased regulatory obligations on landlords and tax increases, there has been an apparent increase in the number of landlords leaving the market – however, this most recent change comes as positive news.
Boosting the housing market
The objective behind this change is to help boost the housing market and wider economy, after a deep freeze following lockdown. The idea is that any considerable saving on stamp duty would encourage buy-to-let investors to return to the rental market and this in turn would help meet the rising demand for rental homes and drive transaction levels.
Mr Sunak said: “We need people feeling confident. Confident to buy, sell, renovate, move and improve, that will drive growth, that will create jobs.”
How will everything work now?
Previously the stamp duty rates were as follows:
- Up to £125,000 – Zero
- The next £125,000 (the portion from £125,001 to £250,000) – 2%
- The next £675,000 (the portion from £250,001 to £925,000) – 5%
- The next £575,000 (the portion from £925,001 to £1.5 million) -10%
- The remaining amount (the portion above £1.5 million) – 12%
And in each case with a 3% addition for buy-to-lets and second homes.
Landlord still required to pay a surcharge
So, the new changes mean Landlords will still be required to pay the surcharge, which is payable on all buy-to-let properties and second homes, however, the new changes makes the cost of investing in property worth £500,000 or less substantially cheaper – and some landlords could be able to save thousands of pounds.
For example, on a £300,000 property the stamp duty bill would now be £9,000 instead of £14,000 – this is because the three per cent surcharge on buy-to-let properties still applies.
On a £500,000 buy-to-let purchase, the £30,000 tax bill would be cut in half.
Which? Has updated their stamp duty calculator to reflect all the latest rate changes. Use their drop-down menus to find out how much you’ll pay when buying a home as a BTL landlord between now and 31 March 2021.
Click here to calculate
Is this a good opportunity for landlords to start adding to their portfolios?
John Goodall, of Landbay, said in a recent podcast that it was a huge opportunity for landlords looking to expand their portfolios.
“It will give landlords the opportunity to move properties from their own name into limited companies which they may not have done previously due to the stamp duty implications.”
By buying an investment property through a limited company, investors can benefit from other tax advantages. These include being charged at a lower corporate tax rate of 19 per cent – rather than higher personal income tax rates.
New research published just after the announcement has shown that one in four buy-to-let landlords are planning to expand their portfolio this year, according to new research. With buy-to-let continuing to deliver solid returns that outstrip many other asset classes, a fresh report from Rightmove shows that 25% of buy-to-let landlords are planning to add to their portfolio this year.
So, with the stamp duty changes, plus the new statistics from Rightmove, this is indicative that now could be a good time to start expanding your portfolio.
