Stamp duty holiday: What you need to know
Recently the Chancellor made some interesting announcements in the Summer Statement designed to help to stimulate the economy. One that may be of interest to Landlords is the Stamp Duty Holiday.
From 8 July 2020, anyone purchasing a property in England and Northern Ireland will find that the threshold for paying stamp duty has increased to apply to properties of £500,000 or more, instead of £125,000 (or £300,000 for first-time buyers). This is due to run until the end of March 2021.
Property investors and second home buyers must continue to pay a 3% stamp duty surcharge, but they will not pay stamp duty on the first £500,000 of the property’s value. For an investor buying a £500,000 property this would cut the rate of stamp duty payable in half from £30,000 to £15,000. So if you are looking to add to an existing portfolio or start one now is a great time to do this.
But what if I am not looking to buy…..
You may be quick to dismiss this as not relevant to you, but its worth digging a little deeper before you do so completely.
Buy to Let Landlords have been squeezed financially over the last few years with changes in taxation rules substantially eating into profits (especially for higher rate tax payers). The current situation means that for many Landlords it is more tax efficient for them to own investment properties under a limited company structure rather than personally. If you are just starting out now and plan to build a portfolio then a Limited Company is generally the way to go – but if you already own the properties then the transfer to a limited company triggers a Stamp Duty liability. As this liability is now significantly lower this could be the best time to look at changing the ownership structure for your portfolio.
This is a complex area, so you should definitely get some specialist advice for your specific situation before you decide to make a change.