What are the new stamp duty rules for buy-to-let landlords?

Coronavirus has prompted the government to introduce a raft of new measures designed to support individuals, businesses and the wider economy both during and after the pandemic.

Business rates have been slashed, millions of employees were moved to the government’s furlough scheme, while banks offered repayment holidays for those struggling to cover unsettled debt, such as mortgages.

Buy-to-let landlords have also been given some relief in the form of more favourable stamp duty rules. Meaning, if you were looking to invest in your first rental property or grow your portfolio, now could be a good time to do so.

Of course, the first thing is to make sure you are in the best possible position to invest in property. The pandemic has resulted in job losses for millions of people; if you're at risk, then it may be best to hold fire for now until things are more certain.

What are the stamp duty changes?

As Which? explains, stamp duty thresholds across the UK have been temporarily increased as part of the government’s aim to ‘reignite the property market in the wake of the Covid-19 outbreak’.

The temporary rates will apply until 31st March 2021 and differ depending on the country.

In England and Northern Ireland, the threshold has been increased to £500,000, though buy-to-lets and second home purchases still have a 3% surcharge on rates. The new rates look like this for each portion of property price:

  • £0-£500,000 = 3%
  • £500,001-£925,000 = 8%
  • £925,001-£1.5m = 13%
  • £1.5m+ = 15%
     

This is Money shares an example:

‘It means a landlord purchasing a home worth £300,000 would now pay £9,000 in stamp duty instead of £14,000.’

Unfortunately, if you live or are looking to purchase a buy-to-let property in Wales, then you’ll need to pay the same rates as before. For other purchases, the country has increased its Land Transaction Tax threshold to £250,000.

Scotland has similarly raised its Land and Buildings Transaction Tax threshold to £250,000 until next March, though buy-to-let purchases and second homes will be eligible for a 4% surcharge on each tier. The new rates look like this:

  • £0-£250,000 = 4%
  • £250,001-£325,000 = 9%
  • £325,001-£750,000 = 14%
  • £750,001+ = 16%

Which? also has a handy calculator where you can find out how much stamp duty you’ll pay on a house depending on its price and location.

Where’s best to purchase a buy to let?

As This is Money explains, some specialist lenders are currently offering competitive mortgage deals for landlords, for example by increasing loan sizes and slashing deposit demands. But if you’re serious about purchasing property, where should you be looking?

If you’re flexible with location, there are a number of regions you should consider targeting your search. Data from estate agent Hamptons International show that the North West has become the strongest rental market in the UK, wth rents jumping 5.2% in the last year.

Other regions recording a rise in average year-on-year rents include the East Midlands (4%), Wales (2.6%), West Midlands (2.1%), South West (2.1%) and Yorkshire & The Humber (1.3%).

Watch out for areas that have recorded a drop in average yearly rents. These include London (-7.4%), outer London (-3.6%), South East (-2.2%), East of England (-0.2%) and North East (-0.7%).

Fewer international tenants, coupled with families leaving the capital during the pandemic, has been blamed for the significant decline in year-on-year rents in London.

Protect yourself with buy-to-let insurance from Stride

If you’ve weighed up the pros and cons and have decided that you’re in a good position to invest in a buy-to-let property, then you need a great partner who can help when it comes to securing insurance for landlords.

Stride has over 40 years of experience and is partnered with some of the best names in the industry, including Zurich, AXA and Aviva. We’ll help to find you the best cover for your property or portfolio at a competitive rate.

As well as buildings and contents cover, we can also include rent guarantee insurance – especially important in these times of job losses and recession.

Get a quick landlord insurance quote now 

Published: 2nd September 2020 (Maddie Dean)
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Need help finding the exact insurance for you? Get insured