How will stamp duty changes affect landlords?

Rishi Sunak’s latest budget announcement gave a much-needed helping hand to the arts and, more significantly for us, a stamp duty holiday for purchases of second and additional homes. For the private rented sector this is incredibly welcome news, but what does it mean specifically for landlords and what considerations should they be making?


Stamp duty changes explained

Sunak’s recent mini-budget announcement confirmed stamp duty would be reduced to a 3 per cent levy on additional home purchases up to £500,000. Previously, this rate applied to properties up to £125,000 and they were charged 5 per cent on the next £125,001 to £250,000 and 8 per cent on homes between £250,001 and £925,000. 

For properties over £500,000, meanwhile, the rates will now be 8 per cent on the next £425,000, 13 per cent on the next £575,000 and 15 per cent on whatever remains above that. It’s the houses in the £500,000 bracket that offer the best value during this period, so there is bound to be a run on these properties in the coming weeks and months.

For those looking to build their property portfolio, this could mean savings in the multiple thousands and the measures are set to last until 31 March 2021; significantly longer than anyone expected. It’s not just individuals who will benefit from these changes either, limited companies will also reap the rewards, as property investors who purchase through limited companies will also be exempt up to £500,000.

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How landlords stand to benefit from stamp duty changes

Any saving on stamp duty is going to encourage buy to let investors to jump back into the rental market and these savings look set to be substantial. It’s a win-win for the market too, as heavier investment by more landlords means more rental properties on the market and there is a major demand for properties right now, with Rightmove noting a 22 per cent increase in demand for lettings compared to this time last year.

There have been dozens of changes lavished on the private rented sector over the last few years, with increased regulatory obligations and tax increases leading to thousands of landlords leaving the sector. But more Brits than ever before are choosing the rental lifestyle.

The new tax incentives unveiled by Sunak should act as a catalyst for change, bringing those landlords who left the market back out of the woodwork and reversing a damaging trend. The savings are immediate and substantial, with those purchasing a property worth £500,000 looking to save around £15,000.

Analysis of the new (temporary) rules by AJ Bell, meanwhile, revealed that a landlord investing in a property worth £300,000 would pay a £9,000 stamp duty bill rather than £14,000.

This is because, whilst normal stamp duty rates no longer apply, the 3 per cent second home surcharge that first caused many landlords to turn their backs on the sector (alongside the changes to relief on Capital Gains Tax) does remain in place. This is something landlords have been fighting to reverse for a while now but it doesn’t appear to be going anywhere anytime soon.

According to John Goodall, chief executive of Landbay, the changes will “allow landlords to move properties from their own name into limited companies which they may not have done previously due to the stamp duty implications.” It’s essentially levelling the playing field after almost a decade of the Government attempting to remove tax burdens from first-time buyers and place them on landlords. 

There are dissenting elements of the Labour shadow cabinet that disagree with the changes as there was always going to be, with shadow secretary Thangam Debbonaire calling it a “£1.3 billion bung” to landlords. She claims: “It is unacceptable that the Chancellor tried to sneak out this huge bung to second homeowners and landlords while many are desperate for support.” But for the private rental industry in general, the supposed drawbacks are a little harder to quantify.

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Embracing the new normal

With the extension of the eviction ban and the forthcoming abolition of Section 21 on the horizon, these are tough times for private landlords and it would appear that Mr Sunak appreciates that. Alongside the generous stamp duty amendments, he also unveiled the £2 billion Green Homes Grant, which will provide at least £2 for every £1 landlords spend on making their properties more energy-efficient, up to £5,000 per property. This will not only benefit landlords but tenants too, as it will mean lower utility bills and more comfortable homes.

Of course, the Chancellor could always go further. According to National Residential Landlords Association CEO, Ben Beadle, additional rates could be scrapped “in cases where landlords invest in properties adding to the overall supply of housing, including investing in new builds and bringing empty homes back into use.” But for now, let’s not look a gift horse in the mouth.

Right now, we need all the help we can get and our advice is that any landlord reading this who was considering expanding their portfolio, but was put off by the pandemic, could be taking this opportunity to invest in their future. 


For more information and advice for landlords navigating the COVID-19 pandemic, check out our report on everything landlords need to know about coronavirus.

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