A welcome reduction in stamp duty land tax for landlords
The second budget announcement of 2020 – the Summer Statement – took place as the UK began its gradual unlocking caused by the global pandemic, and finally brought long-awaited, and very welcome news for landlords who are considering expanding their portfolio.
Chancellor Rishi Sunak announced a reduction in Stamp Duty Land Tax (SDLT) in Westminster on 8th July, and the policy detail confirmed that investors are also set to benefit from this temporary relief.
Since April 2016, those buying a second or subsequent home in England have been liable for a higher SDLT levy compared to the rates imposed on those purchasing a house to live in themselves. The policy had initially led to a surge in investment purchases immediately prior to the change in late 2015/early 2016 – but what followed was a reduction in the growth of new landlords entering the market; and less landlords chose to expand their investment portfolio.
Over the last four years, we have repeated our calls for this policy to be reversed. There is no reduction in demand for rental homes from tenants who are unable to access to social housing, and from those who can’t - or don’t want to - purchase a home of their home. However, the policy always risked leading to a reduction in new supply entering the market. Increased demand against reducing supply only serves to push up monthly rental costs, which certainly isn’t helpful for tenants.
Therefore, the Chancellor’s most recent announcement is very welcome, as we could now see landlords benefit from a reduction in their initial investment outlay by more than ten thousand pounds, encouraging them to invest again.
The new SDLT rates are:
The first £500,000 3%
The following £500,001 - £925,000 8%
The following £925,001 - £1.5m 13%
The final element above £1.5m 15%
Until this most recent change – which was implemented immediately following the announcement – landlords purchasing a new investment property had been liable for 3% tax on the first £125,000 of the purchase price; 5% on the next £125,000; and 8% on the portion £250,000 up to £925,000.
The rate is unchanged on the portions between £925,000 and £1.5m and £1.5 plus.
However, this temporary measure means that a landlord purchasing a property, for example, for £260,000 will see their SDLT liability reduce by £3,000 to £7,800.
Meanwhile, an investment property purchased for £475,000 will mean a landlord will enjoy a £13,750 saving on their tax liability, from £28,000 down to £14,250.
But this is a short-term measure, and the scheme is due to end on 31st March 2021. Therefore, as some property chains can take several months to complete, we would urge aspiring landlords, or those planning to expand their portfolio in the short or medium term, to act now.
If you are now planning on expanding your portfolio please speak to your local haart branch, or alternatively contact our investor services team.