End of stamp duty holiday – what do landlords need to know?

The stamp duty holiday has given the property market a welcome boost since it was introduced by the Chancellor in his Summer Statement last year.

With the full stamp duty holiday due to end this month, and tapered before it returns to the original rates on 1 October, here’s an overview of what this means for landlords and the property market.

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How’s stamp duty changing – and when?

The full stamp duty holiday – which currently applies to the first £500,000 of a property purchase – is coming to an end on 30 June. This will be tapered before the pre-pandemic threshold of £125,000 returns in the autumn.

From 1 July until 30 September, stamp duty will only apply to residential properties that cost over £250,000.

What does this mean for the property market?

Before the stamp duty extension in March 2021, there had been fears of a ‘cliff edge’ when the scheme ended.

Industry bodies came together to write an open letter to the Chancellor, Rishi Sunak, warning that if there wasn’t an extension then house sales could fall through.

While it’s hoped that the gradual tapering of the scheme will avoid a sharp property market downturn, buyers could still pull out of sales if it looks like they’ll miss the deadline.

We’ve also seen a boom in property prices over the past year – up 10.9 per cent from May 2020 according to Nationwide house price index – but there’s a question whether this trend will be reversed after the tax holiday ends.

A drop in demand generally could be good news for proactive landlords looking to buy another property if prices start to fall. However if you’re thinking of selling up, you’ll be hoping the upward trend continues.

Either way, make sure you keep an eye on property values and housing demand in your area if you’re considering buying or selling in the coming months.

What can landlords do now?

Consider a buy-to-let purchase of £250k or less

If you’re planning to expand your property portfolio and want to make the most of the savings offered by the stamp duty holiday, location will be a key factor here.

House buyers have until autumn 2021 to benefit from the extension on properties that cost £250,000 or less, although landlords still have to pay the three per cent stamp duty surcharge.

You might want to look for a property in the North of England where you can typically get more for your money than in London and the South of England. Our guide to the best buy-to-let areas also includes factors like rental returns and long-term house price growth to help you narrow down your options.

According to recent research from Rightmove, the average asking price for properties in May was below £250,000 in Yorkshire and the Humber, North East and North West England, and Wales.

That said, there’s only a few months left to go before stamp duty threshold returns to the original rates, so you might struggle to complete by the 30 September deadline.

Buy your next property through a limited company

We reported earlier this year that there’s been a sharp rise in landlords using companies to buy rental properties as this can offer more attractive tax rates.

Using a limited company means landlords can offset their mortgage interest against profits and also benefit from paying corporation tax instead of higher individual tax rates.

Tax and finance can be complicated, so it’s important to get professional advice if you need it.

Have you benefited from the stamp duty holiday? Let us know in the comments.