New Stamp Duty Hike: How to Work Around It and What Other Landlords Are Doing
With the surprise budget announcement on Stamp Duty earlier this month, let’s look at some ways you can work around the extra charges and see how other landlords are handling the news.
In case you missed it, Labour announced an increase of 2% Stamp Duty Land Tax (SDLT) surcharge on second homes and buy-to-let properties. That means landlords now face a 5% surcharge when buying investment properties, which could definitely slow down some plans to expand.
Landlords’ Take on the Stamp Duty Change
A recent survey found that while landlords aren’t thrilled with the Stamp Duty increase, they’re more worried about the possibility of Capital Gains Tax (CGT) going up. Before the Autumn Statement, 19% of landlords paused their plans because they were concerned about CGT. Some even thought of selling off properties or leaving the market entirely.
But since CGT wasn’t raised, 84% of landlords are sticking with buy-to-let, and 4% are still planning to grow their portfolios. Among those planning to buy, opinions are split: 47% are adjusting plans to avoid the higher SDLT, while 53% are moving forward without changing anything.
Ways to Reduce the Stamp Duty Hit
If you’re thinking of expanding your portfolio, here are a few ways to help with the new costs:
- Derelict Properties: Properties deemed uninhabitable qualify for non-residential rates, which means a lower SDLT rate. Just be sure it’s truly derelict, as the property must meet strict criteria to qualify. HMRC only allows this if the property has serious issues, like asbestos, structural instability, or a major safety risk.
- Semi-Commercial Properties: Mixed-use properties, like a shop with a flat above, are taxed at the same lower SDLT rate as derelict properties. These properties often provide strong rental yields and can sometimes be converted into all-residential units under permitted development.
- Share Purchase: Another option is to buy shares in a company that owns property. Stamp Duty is only 0.5% on shares, which can be a significant saving if the company owns multiple properties. This route requires a solicitor familiar with such transactions, and a mortgage broker can help set up both a bridging loan and a traditional mortgage afterward.
- Portfolio Purchases (“Rule of Six”): If you buy six or more properties at once, SDLT treats it as a non-residential transaction, which generally means lower tax. For financing, a portfolio mortgage is usually best.
What’s Next for Landlords?
Right now, it’s worth exploring your options. This budget wasn’t great for landlords, but there are still some smart investment opportunities, plus mortgage rates are coming down.
As seasoned property professionals with over 20 years experience in the industry, The Property Sourcing Experts are dedicated to securing the hard to find opportunities for our clients throughout the UK, enabling you to bolster and diversify your property portfolios.
Whether it’s a flip, a below market value purchase with instant equity, or a high yielding property… whatever your criteria, we’re going to secure it for you.
We’ll carry out the due diligence, do the homework on the property, and crunch all the numbers. All done before we call you. Come along to our office in Hitchin, Hertfordshire and we can sit down over a coffee even and do this together.
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Get in touch today and together let’s drive your property dreams & goals forward. We’ve got this!
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