How the extension in Stamp Duty Land Tax (SDLT) benefits landlords
The Spring Budget brought further welcome news for any landlord who was considering expanding their portfolio, but had concerns that time was running out.
Chancellor Rishi Sunak announced the ‘Stamp Duty holiday’ would be extended until the summer, at which point it will be tapered off into the autumn.
Since April 2016, those buying a second or subsequent home in England have been liable for a higher Stamp Duty Land Tax (SDLT) levy compared to the rates imposed on those purchasing a house to live in themselves.
Over the last five 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 social housing, and from those who can’t - or don’t want to - purchase a home of their own. 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.
Last summer, we warmly welcomed the Chancellor’s announcement of the temporary reduction in SDLT; just as we welcome the latest move.
The SDLT rates for second and subsequent homes are:
The first £500,000 3%
The following £500,001 - £925,000 8%
The following £925,001 - £1.5m 13%
Any final cost above £1.5m 15%
Until the temporary reduction in the levy, 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 from £250,000 up to £925,000. The current savings can add up to as much as £15,000.
This scheme will continue until 30th June 2021; when the level at which the basic level of SDLT kicks in is reduced to £250,000, before being reduced again after 30th September. Therefore, as some property chains can take months to complete, we would urge aspiring landlords, or those planning to expand their portfolio in the short term, to act now.