As July 2021 hits a mid-way point, we will continue to see the phasing out of the stamp duty holiday. The stamp duty holiday gave landlords with properties costing £500,000 or less a temporary reprieve from the duty. But what does this mean for UK landlords?
The Adjustment Period (Gradual Implementation) Will Help to Ease Concerns
As of July 1, the stamp duty will be gradually reapplied to properties starting with the July 1 to September 30 adjustment. This will see the duty being applicable to properties costing over £250,000. Afterwards, the duty will return to the threshold of £125,000, obtained before the pandemic.
As the ending of the stamp duty holiday loomed, industry experts had feared a sharp downturn in the UK property market, but it is anticipated that the gradual approach will avert this. The gradual change also means that property investors will be allowed some time to adjust.
Look Into Cheaper Properties
For the next few months properties valuing £250k or lower will still benefit from the reprieve; investors should consider focusing on these types of properties. Be prepared to pay the 3% stamp duty surcharge, though, as that still remains. Of course, this will affect your acquisitions in several ways. First, you will need to look into locations that reflect this lower price. Locations like those areas in the Northern section of England. Up to as recently as May, locations like Yorkshire and the Humber, North West England and Wales were identified as having an influx of property prices below £250,000.
Landlords who are seeking to buy still need to make informed decisions. Data on the propensity of the property to generate income through rentals or to grow in value should be foremost in the buyer’s considerations and should be the primary influence in the purchasing decision. As a property buyer, you also have to manage your expectations as the properties that attract lower prices will likely also be smaller.
Brace for the Financial Impact
If location and size are non-negotiable variables for you, you’ll simply have to be prepared to fork out more cash. Purchasing properties above the £250k price will mean paying the stamp duty.
Timing is Important
Landlords who are expanding their portfolios will need to complete their processing by September 30 in order to benefit from the extended holiday. This means you’ll have to exert greater effort in ensuring speedy transactions.
Jason Harris-Cohen, from Landlord house-buying company, Landlord Buyers, says:
“I think that the market will continue to be fairly buoyant, as in theory, anyone hoping to take advantage of the SDLT holiday, would have had to agreed a purchase by April to complete by June. Therefore, this has been the case for several months now.
There is typically a shortage of stock at present, and strong demand, especially by people wanting more space as we adjust to more permanent working from home arrangements.
Mortgage interest rates are low at present, this is also fuelling the property market, when debt is cheap.”
Consider Using Limited Companies
If you want to limit the impact of the stamp duty on your property investments, consider going through a limited company for property purchases. The right limited company can offer buyers of rental properties more affordable tax rates because those purchases tend to attract corporate tax instead of the more expensive individual tax.
Ultimately though, the decision to buy property in the face of a waning tax holiday necessitates strategic thinking and expert advice, so consider getting tax an expert to guide you.
