Stamp Duty Holiday
Landlords have been gifted a stamp duty holiday which was announced in the chancellor’s summer statement. The threshold at which stamp duty kicks in will be lifted from £125,000 to £500,000 in England and Northern Ireland. Previous stamp duty holidays were aimed at FTBs and saved them £319m.
In a bid to boost the economy post-lockdown Buy-to-let investors were handed a surprise in the chancellor’s summer statement as tax savings from the stamp duty holiday will also apply to landlords who expand their property portfolios or incorporate as a lettings business.
Stamp duty will now be £500,000 in England & Wales rather the £125,000 and is active from 8th July 2020 until 31st March 2021. For property purchases above £500,000 the 3% surcharge will still be payable by property investors and second home owners. This would reduce stamp duty from £30,000 to £15,000 on a £500,000 property purchase which is a massive saving!
The chancellor has announced a temporary holiday on stamp duty on the first £500,000 of all property sales in England and Northern Ireland until the until 31 March 2021. The tax threshold has been temporarily raised until next March to boost the property market and help buyers struggling because of the coronavirus crisis. The changes have come in with immediate effect.
BTL Saving Example
Anyone completing on a main residence costing up to £500,000 between 8 July and 31 March will not pay any stamp duty, and more expensive properties will only be taxed on their value above that amount.
If the property purchased is your main home you won’t pay any stamp duty on it at all if it costs £500,000 or less. The next portion of the property’s price (£500,001 to £925,000) will be taxed at 5%, and the £575,000 after that (£925,001 to £1.5 million) will be taxed at 10%.
The remaining amount (over £1.5 million) will be taxed at 12%.
As mentioned landlords and second home buyers are also eligible for the stamp duty holiday but will still have to pay the extra 3% of stamp duty they were charged under the previous rules.
This means that landlords could make, on average, a 40% saving on new investments during this time. It also makes it possible for property investors to look at higher-priced properties, which in turn can attract a higher rental income and therefore be a more profitable investment in the long-term.
The benefits will be concentrated on areas of higher average house prices, such as London, the south east and south west. Estate agent Savills identified the local authority areas which will see the biggest falls in stamp duty receipts, based on previous sales figures, top of the list being Wandsworth (with a fall of £40m), Bromley (£35m) and Wiltshire (£29m). According to Rightmove, the property website, the average saving in the north east will be £646, versus £15,000 in London.
While the quadrupling of the threshold at which duty applies is likely to boost activity at a time of economic uncertainty, some experts expressed concern about the effect of the March 2021 deadline. Especially if the market still hasn’t fully recovered by the March deadline.
Any transactions currently going through the conveyancing process before this announcement will still benefit from the change even if they have exchanged contracts would still benefit, since stamp duty is only payable on completion of a purchase.
Green Homes Grant
Rishi Sunak also announced a new Green Homes Grant Scheme, offering vouchers of up to £5,000 for homeowners and landlords to make environmentally-friendly changes to their properties. The Government has said that the £2 billion Green Homes Grant will provide at least £2 for every £1 homeowner and landlords spend to make their homes more energy-efficient, up to £5,000 per household.
What are your thoughts on the stamp duty holiday? Comment below…