Menu

Buy to Let

Landlords dealt Budget blow with stamp duty hike

Landlords dealt Budget blow with stamp duty hike
Christina Hoghton
Written By:
Posted:
30/10/2024
Updated:
30/10/2024

Chancellor Rachel Reeves has announced that the stamp duty surcharge on second and additional properties will increase from 3% to 5% from tomorrow.

This surcharge is added to the standard residential stamp duty rates already payable by property buyers. It affects buy-to-let landlords as well as second homebuyers.

According to Rightmove, based on the average asking price for a home (£371,958), a landlord could face an additional charge of more than £7,000 from tomorrow when buying a property, on top of the stamp duty costs they were already expecting to pay.

The property portal’s expert Tim Bannister, said: “In the short-term, some landlords may need to pause for thought, but in the longer-term it becomes yet another charge that landlords wanting to invest in buy-to-let will have to become accustomed to and factor into their decision making.

“Overall, we need more homes in the rented sector not fewer, but in recent times we have seen record levels of stock leaving the rental market.

More pain ahead

Coventry Building Society did its own sums on the tax change which show that, as well as becoming more expensive for landlords to buy a property tomorrow, it will get worse again from next April.

Sponsored

That’s because current temporary higher stamp duty thresholds are set to revert to their previous lower level in the next tax year.

The mutual said that for anyone buying an average-priced property in England at £309,572 the Stamp Duty bill on additional property today, with the 3% surcharge, is £12,265.

The Stamp Duty on an additional property tomorrow, with the 5% surcharge, will be £18,457.

But, after 31st March 2025, when the temporary thresholds end, the Stamp Duty on an additional property will be £20,957.

Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “The country needs a healthy, thriving private rental sector, but immediately hiking the Stamp Duty surcharge to 5% is disincentivising any further investment from current and would-be landlords.

“It’s a significant blow to the sector and, without dramatic housebuilding to improve supply, it could lead to a shortage of rental homes, and push rents up.”

CGT reprieve

One piece of good news for landlords was that the feared hike in Capital Gains Tax (CGT) for landlords selling properties didn’t materialise.

While the Chancellor did increase CGT on other assets, she maintained the rates on residential properties at their existing level.

Sarah Coles, head of personal finance at Hargreaves Lansdown concluded that property wasn’t a tax-efficient investment: “The rise in the stamp duty surcharge will mean a bigger tax bill when landlords get into property,” she said.

“The ongoing freeze in income tax thresholds and less generous mortgage tax relief means they pay more tax on rent as they go along. Then when they come to sell up, there’s capital gains tax to pay.

“Unlike investors in stocks and shares, property investors can’t protect themselves from this tax by using ISAs. They can’t realise capital gains gradually either and take advantage of their annual allowances. It means landlords may well be taking a closer look at their portfolio today, and wondering whether all this tax means the sums no longer add up.”