Lint Groups Update on How the Recent UK Stamp Duty  Changes Impact the Buy-to-Let Market
The Covid-19 pandemic has caused an upheaval of unprecedented proportions in every sector of the economy. Prospects were bleak for both suppliers and consumers, including the property sector.

Amidst all this news of doom and gloom, the Chancellor of the Exchequer, Rishi Sunak, made some welcome announcements for property buyers, sellers, and even those looking to re-mortgage.

The Chancellor of the Exchequer Announced 

The new rule, which came into effect on 8th July 2020 continues until 31st March 2021, is beneficial for both primary homeowners and buy-to-let (BTL) residential property buyers. Under it, there is no stamp duty payable on properties whose sale price is £500,000 or less. According to estimates, this means that roughly 8 out of 10 property buyers would be benefit as they would not have to pay any stamp duty to HMRC upon completion of the purchase.

While it's quite straightforward for primary residential property buyers, let's examine what it means for prospective BTL property buyers. The same rule applies even if you are looking to purchase a second or even third property (any residential property that will NOT be your primary residence) stamp duty would not be applicable for purchase prices up to £500,000. The old 3% stamp duty surcharge however is still payable. (since 2016, buyers of second properties have had to pay an extra 3% surcharge for purchases over £40,000) 

So, does this mean that only those looking to buy properties under £500,000 would enjoy this benefit, which is merrily being declared as a 'tax holiday'? The answer to this question is no, even those purchasing more expensive properties would benefit. Let's see how. 

Stamp duty calculation happens by breaking down the purchase price of a property into price bands. So, for a BTL property valued at £750,000, stamp duty payable earlier (effective 1st April 2016) was:

 

Stamp Duty changes for buy to let

 

The lower rates that were applicable for the initial price bands with lower thresholds would not be applicable for the price bands with higher thresholds.

Another important thing to be noted is that first time home buyers, who were earlier entitled to 0 tax for a purchase price up to £300,000, will also benefit from this rule, but they would technically not be eligible for the first buy discount and this rebate would supersede that. A few more key points to be noted are:

  1. If your solicitor or conveyancer has only just exchanged contracts with his counterpart representing the seller, then you are still eligible to avail this benefit.
  2. Conveyancing processes that have just begun, where property queries are still being handled or searches are still underway, are of course eligible for this benefit.
  3. If you have fully completed the purchase of the property, which means that the keys have been handed over by the real estate agent to your conveyancer or to you, then you are not eligible for this benefit.
  4. If you have a mortgage offer still being negotiated with a lender, then it would be worthwhile to ensure that this benefit is considered, and a revised offer is issued. In this way, you don't have to borrow more than what you need to purchase the property, thereby payer lesser interest to your lender. A few lucky ones may even get better rates if their total purchase costs reduce drastically, especially in high-value deals.
  5. The tax holiday would not have any real impact on the value of the property, so don't expect any big ripples in the pond of valuation. That would still be an important factor when your lender is reviewing your application for loan approval.
  6. Looking at the Larger Picture

    This move is aimed at injecting a boost in the flagging property market scene in the UK, since this would encourage more people to purchase properties during this time. It would also influence many reluctant sellers to put their property on the market too. In this way, the process will remain continual and beneficial for every single party involved in the process, right from the estate agent who acts on behalf of the seller to the moving company that moves the buyer's furniture after the purchase has completed.

    Buy-to-let property owners should also make use of this benefit by availing competitive mortgage rates to buy more or bigger rental properties, and even convert them from private to limited liability company holdings to saves taxes in the long run. This is because the stamp duty charge on transferring properties would also be reduced.

    If you are looking to grow your property portfolio, please feel free to contact our sales team on 020 8554 9999 who can advise you on how to get the benefits out of this opportunity. 

 

 

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