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Summer Statement 2020 for landlords: Chancellor lifts market with stamp duty cut

2-minute read

Mollie Millman

10 July 2020

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Landlords welcomed the Chancellor’s Summer Statement this week after he announced a hefty stamp duty cut.

Rishi Sunak has raised the initial stamp duty threshold from £125,000 to £500,000 with immediate effect.

The stamp duty ‘holiday’ will be in place for more than eight months. It will end on 31 March next year and will help boost the economy and housing market amid the coronavirus pandemic.

Landlords will still pay surcharge

It leaves landlords paying only the surcharge, which is payable on all buy-to-let properties and second homes.

It means landlords will see their tax bills start at a rate of three per cent on properties costing up to £500,000.

Previously, landlords paid three per cent plus the residential rates of zero (up to £125,000), two per cent (between £125,001 and £250,000) and five per cent (between £250,001 and £925,000).

It makes the cost of investing in property worth £500,000 or less significantly cheaper. Some landlords could be able to save thousands of pounds.

For example, on a £300,000 property the stamp duty bill would be £9,000 instead of £14,000, according to investment broker AJ Bell. This is because the three per cent surcharge on buy-to-let properties still applies.

On a £500,000 buy-to-let purchase, the £30,000 tax bill would be cut in half.

Restarting the housing market

The Chancellor introduced the cut in a bid to boost the housing market and wider economy, after a deep freeze following the virus lockdown.

The decision to cut stamp duty was welcomed by experts, with Eric Leenders, of UK Finance, saying: “The Chancellor’s announcement on stamp duty should give a welcome boost to the housing market and in turn have positive knock-on effects for the wider economy.”

And Jamie Cooke of property auctioneers iamsold, said: “This is massively positive for the property sector. This could see a strong return of buy-to-let investors who are perhaps sitting on cash reserves.”

Opportunity for landlords to expand portfolios

John Goodall, of Landbay, said it was a huge opportunity for landlords looking to expand their portfolios.

“It will give landlords the opportunity to move properties from their own name into limited companies which they may not have done previously due to the stamp duty implications.”

By buying an investment property through a limited company, investors can benefit from other tax advantages. These include being charged at a lower corporate tax rate of 19 per cent - rather than higher personal income tax rates.

What do you think about the Chancellor’s stamp duty cut? Let us know in the comments below.

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