Respite was finally on the horizon for beleaguered landlords when mortgage rates began to fall this year. However, property investment is now harder to afford as stamp duty hits them with a double-pronged assault.
Landlords’ stamp duty bills in April may be almost double the amount they were before Chancellor Rachel Reeves’s Budget, Wealth and Personal Finance can reveal.
Buyers of additional properties in England – which include buy-to-lets and second homes – will need to pay an average of £20,957 from April, according to Coventry Building Society calculations.
This is up from £12,566 just a few weeks ago as landlords now must pay an increased surcharge, and, also, thresholds will be lowered from April. It has the potential to completely change the property investor landscape.
Here are the stamp duty hotspots where landlords will be hit hardest with upfront costs.
Chancellor Rachel Reeves failed to extend the stamp duty holiday in her October Budget
What has changed since the Budget?
Buyers of second homes now need to stump up a 5 per cent surcharge on existing stamp duty rates – up from 3 per cent.
Plus, the Chancellor failed to extend the stamp duty holiday at the Budget in a second blow for landlords, who have been enjoying increased thresholds since 2022.
Stamp duty is payable on residential properties that cost more than £250,000. First-time buyers don’t pay stamp duty on properties valued at less than £425,000.
Rates begin at 5 per cent and increase to 12 per cent depending on the value of the property. Additional property buyers must now pay an extra 5 per cent.
For example a landlord buying a property worth £309,572 (the average price of a home in England, according to the UK House Price Index) would have paid £12,266 in stamp duty before the Budget. At this point a 3 per cent surcharge on top of existing stamp duty rates was imposed.
On October 31 after Ms Reeves increased the surcharge to 5 per cent, £18,457 would have been due. That same landlord will need to pay £20,957 from April 1 when the stamp duty holiday ends and thresholds fall back. On top of that, new rules mean landlords must attain an energy performance certificate (EPC) at band C by 2030, which could also prove costly.
Landlords in South face biggest bills
Brokers have warned droves of landlords could trim back investment or even exit the sector altogether following rises to the much-hated tax.
Those spooked by the Chancellor’s announcement have already pulled out of deals after they were suddenly forced to find thousands of pounds more to complete sales within a matter of days.
John Hawkesford, of Hawkesford James estate agents in Sittingbourne, Kent, says landlords in his area are already anticipating a squeeze. He knows of seven who issued notice on their properties in order to sell up earlier this month.
Plus, he’s lost two sales since the Budget as landlords withdraw investment in the face of higher upfront costs. ‘Landlords are so scared that Labour are going to come back later down the line with more charges so it’s seen as time to exit the sector,’ he says.
In spring, buy-to-let investors in the capital will face an average stamp duty bill of £43,121, the Coventry BS calculations show.
The calculations consider the 5 per cent surcharge and the fallback of the thresholds. It’s based on official average house prices for regions. London has the biggest average bill. Before Ms Reeves’s inaugural Budget, just £29,997 was due for investment purchases in the capital. Landlords in the South East will have the second highest stamp duty charge after London at £28,480 from April, up from £18,284 just a month ago.
Plus, property investors in the East of England will be hit by a £24,419 tax bill from spring, up from £15,035 before the Budget.
Portfolio and casual landlords will vanish from the property scene because of the increase, says Ben Perks, director of Orchard Financial Advisers.
He says: ‘I have portfolio landlords who up until a year ago were buying a property every three months at least. Now they have to pay additional tax so they have been put off. Casual landlords just won’t bother as they’ll have to pay extra tax to get the property to then be taxed on their income.’ The changes could see an exodus of landlords to the North where yields are more attractive.
North and Midlands to see largest hikes
While landlords in the South will need to stump up the highest amount from April, other regions will see the biggest percentage increase in their stamp duty bills.
Buyers of a second home in the East Midlands will pay 99.83 per cent more than before the Budget.
The county set to see the biggest hike is Greater Manchester. Here, landlords’ stamp duty bills will increase by 99.14 per cent in April. Payments will climb to £14,558 in April, up from £7,311 last month.
Second home buyers in Nottinghamshire will have to pay an average of £14,191 from April, a 98.38 per cent increase on stamp duty bills from before the Budget.
The West Midlands county follows close behind with a 98.24 per cent increase.
However, the impact of stamp duty changes won’t just be felt in the regions with the biggest bills or percentage hikes, as all counties with available house price data will see their stamp duty liability rise by more than a third in April.
Are you a landlord worried about the stamp duty increase? Email [email protected]
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