Last Chance For Landlords To Grab Stamp Duty Savings

Time is running out for landlords taking advantage of the stamp duty holiday to purchase new buy to let homes.

The government has dashed any hopes of extending the tax relief by announcing the holiday will end as planned on March 31, 2021.

The statement was in response to an online petition calling for an extra six months of stamp duty relief that gathered 21,946 signatures.

“The SDLT holiday was designed to be a temporary relief to stimulate market activity and support jobs that rely on the property market. The government does not plan to extend this temporary relief,” said a Treasury spokesman.

“As the relief was to provide an immediate stimulus to the property market, the government does not plan to extend this relief. SDLT is an important source of government revenue, raising several billion pounds each year to help pay for the essential services the government provides.

“All tax policy is kept under review and the government considers the views it receives carefully as part of that process.”

Rush to snap up buy to let homes

The starting point for stamp duty was raised from £125,000 to £500,000 from July 8 to stimulate the housing market in England.

The move triggered a rush to buy homes with transactions 8% higher in October 2020 than a year earlier, said the Treasury.

The petition was started in October by first time home buyer Jonathan Steele.

He is calling for the holiday to run for an extra six months until September 30, 2021.

“Extending the stamp duty holiday for an additional six months will assist many buyers who are looking to move to a property that they will not be able to afford otherwise.  This will help to stabilise the housing market,” he said.

“I am looking to move into a new build which is currently due to complete at the start of March 2021. If this build is delayed past March 31, 2021 then I will not be able to afford the stamp duty so will not be able to afford the house.”

Landlords purchase 134,000 new buy to lets

The latest research suggests the stamp duty holiday has prompted landlords to invest in more property to rent.

Even though they still pay a 3% stamp duty surcharge, investors have bought 134,000 homes to rent this year and buy to let accounted for 15% of all home purchases in November – the highest level of investment purchases in a month since December 2016.

Property consultancy Hamptons says this means a landlord paying £180,000 for a home in November will save £1,100 on a stamp duty bill of £6,500 if the purchase completes before April 1.

The Treasury stands to gain £365 million in stamp duty on investment sales between September and November.

Property boom in the north

Places with the most property sales are the West Midlands, where 22% of homes sales were to investors, followed by the North East and North West, which both posted 18% of sales to landlords.

In London, the tally stands at 15% – up 2% from the previous quarter.

Chancellor Rishi Sunak launched the stamp duty holiday in England to boost the housing market to protect jobs from the impact of the COVID-19 pandemic.

Home sales dropped by almost 50% as coronavirus fears gripped the economy and triggered a series of lockdowns.

During the holiday, house prices have soared, with mortgage lenders the Halifax and Nationwide reckoning £15,000 has been added to the price of a typical home valued at around £275,000 – a rise that cancels out any stamp duty savings for most buyers.

Landlord buy to let purchases – by number

Source: Hamptons

Landlord buy to let purchases by percentage of sales

Source: Hamptons

Landlord Stamp Duty FAQ

During the stamp duty holiday, buyers pay no tax for a main home worth no more than £500,000 until March 31, 2021.

Landlords buying homes to rent still pay a 3% surcharge on top of the rates for each property value banding.

Stamp duty is levied on freehold and leasehold homes bought outright or with a mortgage.

What are the higher rates of stamp duty during the holiday?

Landlords and second home buyers in England will pay these rates of stamp duty until the holiday ends on March 31:

Property price	Stamp duty rate
Up to £500,000	3%
£500,001 – £925,000	8%
£925,001 – £1.5 million	13%
Over £1.5 million	15%

The rates do not apply if a home is worth £40,000 or less or is semi-commercial (like a shop with a flat above).

How will stamp duty rates change from April 1, 2021?

From April 1, 2021, the stamp duty holiday rates will change to:

Property price	Stamp duty rate
Up to £125,000	3%
£125,001 – £250,000	5%
£250,001 – £925,000	8%
£925,001 – £1.5 million	13%
Over £1.5 million	15%

Again, the rates do not apply if a home is worth £40,000 or less or is semi-commercial (like a shop with a flat above).

Do married couples swapping shares of ownership pay stamp duty?

Spouses do not pay stamp duty if they are exchanging shares of ownership on an investment property if no one else is involved in the swap.

Does a company pay stamp duty when buying a buy to let?

Yes. Companies pay stamp duty on any residential property they buy worth more than £40,000 and may pay a rate of 15% on homes valued at £500,000.

The enhanced 15% rate does not apply to companies adding the property a buy to let business or trading as a property developer.

Does the additional homes rate apply if I have a home overseas?

Yes. As a landlord you may live abroad but you will pay the enhanced stamp duty rate if you buy another property in the UK.

How do I work out how much stamp duty to pay?

You can find out how much stamp duty you should pay with a free online calculator on the government’s Money Advice Service web site.

More information

We have more information about tax generally for England and Wales.