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What does the stamp duty cut mean for landlords?

Buy-to-let investors could save nearly £5,000 on average as a result of the new stamp duty cut

Stephen Little
Thu, 07/09/2020 – 14:33

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The stamp duty cut could help reignite the buy-to-let market, according to property experts.

The Government has increased the stamp duty threshold to £500,000 for property sales in England and Northern Ireland, until 31 March 2021.

The buy-to-let market has become increasingly challenging for landlords in recent years, with a raft of new rules and regulations introduced to help rebalance the property market.

Since 2016, private landlords have had to pay an extra 3% on stamp duty when they buy an additional property, while mortgage tax relief has gradually been phased out.

This has led to a slump in profits and an exodus of landlords from the market.

Charlotte Nixon, mortgage expert at Quilter, says the stamp duty holiday could encourage buy-to-let investors to return to the market.

She says: “Buy-to-let investors have left the market in their droves over the last few years after tax changes have made it an untenable investment for many. The stamp duty holiday may serve to entice some of these investors back to the market.

“Not only will this cut help to reignite the property market but also improve the supply of rental properties, which has been dwindling over the last 12 months.”

According to estate agents Hamptons International, the average buy-to-let investor purchasing a home under £500,000 will save £4,720 as a result of the new changes.

It says that that with only 3% of buy-to-let investors buying properties worth more than £500,000, most will stand to benefit.

Investors in London and the South East have the most to gain from the changes as properties tend to be more expensive.

In the capital the average stamp duty bill is set to fall by 46% to £12,520, while in the South East it is expected to drop by 67% to £3,330.

Changes to stamp duty by region

 

Average stamp duty bill under old system

Average stamp duty bill under new system

% change

London

£23,220

£12,520

-46%

South East

£10,230

£3,330

-67%

East

£7,530

£1,840

-76%

South West

£5,820

£1,260

-78%

West Midlands

£3,150

£420

-87%

North West

£2,410

£290

-90%

Yorkshire & Humber

£2,200

£460

-81%

North East

£1,390

£130

-91%

England

£7,120

£2,400

-66%

Source: Hamptons International July 2020

David Whittaker, chief executive of Keystone Property Finance, says the changes to stamp duty could bring a well-needed boost to the rental market.

He says: “The Chancellor’s decision to cut stamp duty will have positive implications for homebuyers across the country and will certainly help to stimulate the housing market. Importantly, this latest cut will also go some way towards providing a much-needed boost for the buy-to-let sector.

“As a result of this measure, many portfolio landlords across the UK will now be considering new buy-to-let purchases.”

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