What landlords need to know about the new stamp duty holiday

The government has introduced a temporary reduced stamp duty rate in response to the ongoing coronavirus pandemic, effective from July 8th, 2020, to March 31st, 2021. While this action was framed around its potential to make accessing the market easier for first time buyers, it is in regard to landlords that the bill really comes into its own and has the most impact.

The change to stamp duty does have some impact on first time buyers of residential properties. If you live in a more expensive area where entry level properties are priced in a higher range, the removal of stamp duty on primary houses below £500,000 will make a significant difference. However, with most first homes costing nearer to £200,000, it is unlikely to have much impact on first time buyers. For those looking to upgrade their home, there is the potential to save up to £15,000 from this stamp duty holiday.

For landlords, however, there is a great deal of money to be saved when acquiring properties not intended to be used as a primary residence. They serve to benefit from other parts of the stamp duty reduction, namely from increased thresholds within the tax brackets. This means that while they do not get the stamp duty break that they would from buying a primary residence, savings are still made, and when the stamp duty can be so costly on additional properties, this is a saving that adds up.

Buy to let investors will still have to pay the 3% stamp duty surcharge that applies to second homes. Where a saving is made is when the property you are acquiring is subjected to a smaller tax than it would have been before July 8th due to the increased stamp duty tax thresholds.For example, if the property you are looking to invest in costs around £200,00, the average price of a house in Birmingham last year, stamp duty will cost you £6,000. THIS IS £1500 less than before the stamp duty reduction. This saving gets even bigger on higher value properties. Buying a large, well located house in Manchester for £500,000 would result in a stamp duty tax of £15,000, saving you a total of £15,000 compared to the previous stamp duty rates.

The potential savings are large, and it can be tempting to take advantage of this. However, it is important to note the potential effect on the market as a whole due to these changes. The reduced rate is likely to entice more landlords back into the property market, and this in turn could cause a rise in house prices that may not make the savings worth it. A good rule of thumb is if you were already intending to invest, now is a good time to do so, but do not be blinded by the potential savings and end up regretting your choice.

If you are in the process of expanding your portfolio, or are looking to become a landlord, while stamp duty is reduced why not appoint Advance Block Management with your property and block management needs.