Last week, Chancellor Rishi Sunak, delivered his speech – ‘A Plan for Jobs’. The statement detailed his plans to boost the economy after the outbreak of COVID-19. In his speech, Sunak announced plans for stamp duty cuts, but what does that mean for landlords?
What are the cuts?
As a result of the outbreak of COVID-19 and consequent lockdown measures, property transactions fell by 50% in May and house prices have fallen for the first time in eight years.
In order to catalyse the housing market and boost buyer confidence, Sunak announced that he was cutting stamp duty. Previously there was no stamp duty on properties below £125,000. This has now been increased to transactions up to £500,000.
The cut is only temporary and will run until 31st March 2021. Sunak predicts that nearly nine out of ten buyers purchasing a house this year will pay no stamp duty at all.
How much will I pay?
With the new cuts, the residential stamp duty rates will look like this until 31st March 2021:
- Up to £500,000 – 0%
- £500,001 – £925,000 – 5%
- £926,001 – £1.5 million – 10%
- £1.5 million+ – 12%
When you buy an additional property, however, you have to consider the 3% surcharge. The 3% surcharge is still applicable, despite the cuts, but landlords will still benefit from savings.
The stamp duty rates for additional properties will look like the below until 31st March 2021:
- Up to £500,000 – 3%
- £500,001 – £925,000 – 8%
- £925,001 – £1.5 million – 13%
- £1.5 million+ – 15%
Property Hub has created a handy calculator to work out how much you’ll save thanks to these temporary cuts.
Will it work?
There have been mixed reactions towards the cut from industry professionals.
David Whittaker, chief executive of buy-to-let lender Keystone Property Finance, predicts that buy-to-let landlords will be making a saving of approximately 40% on their stamp duty bill and will stimulate the housing market, especially the buy-to-let sector.
London tax barrister, Patrick Cannon, warned that the cut might be less positive than it first appears. He has concerns that vendors will raise their asking price by roughly the same amount as the saving and then prices will drop again once it is reintroduced.
While Will Scoular, head of private client lending at Investec, thinks that the cut will help persuade nervous buyers back into the market, he is concerned that the cut may just delay the impact of the crisis until the cuts are removed next year.
Mike Scott, chief property analyst at online agency Yopa, shared his concern that there won’t be sufficient capacity for conveyancers, estate agents, surveyors or mortgage lenders if the cut causes a rush to complete their purchase before the March deadline.
To see the Chancellor’s full speech, click here.