Should the stamp duty cuts have been made available to landlords?

I’ve just heard it called the biggest tax-cutting Budget in half a century, and that is without it actually being a ‘Budget’ and it all being done and dusted in half an hour. The repercussions from this will however be with us for many years to come, possibly a generation.

Sticking to our housing ‘knitting’, as anticipated we are getting immediate cuts to stamp duty, in terms of increases to the zero threshold level and greater levels of relief for first-time buyers.

Perhaps of more immediate interest to those active in the buy-to-let sector, is the news that these cuts will also be available to additional purchasers such as landlords, for example, which was always likely given the added level of complexity it would have brought to all involved if the Government had kept additional property purchasers on the old threshold.

So, what does this mean in practice? Well, let’s look at a buy-to-let landlord buying a new property valued at £300k under these new stamp duty rules. Previously, it would have cost you £14k in stamp duty, from now on it will cost £11.5k, a saving of £2.5k.

Now, £2,500 is not to be sniffed at – it is money that can be utilised by landlords, and here is a suggestion that advisers might want to make to clients in this position, particularly if they are purchasing properties with a below C EPC level. They might wish to use that stamp duty saving in order to make the improvements required in order to move the dial on the EPC? That would certainly be a good use of the money.

However, in the grand scheme of things, for those who believe this should not have been a stamp duty cut for landlords as well and that it gives them a far superior advantage over first-time buyers in particular, I’m not so certain this will be the reality of the situation.

Does it truly provide a hugely significant advantage for landlords? Certainly, landlords are not going to look a gift horse in the mouth, and the fact this is a permanent change to the stamp duty structure, means they need not rush into a purchase that has to be completed by a certain deadline in order to secure the saving.

But, as has been said many times before, if you have a client whose sole reason for buying an investment property right now is to make a slight saving on stamp duty, then you’re probably going to be questioning whether they should be buying in the first place, and whether they’d truly done their due diligence and numbers.

Let’s not forget that the costs that come with being a buy-to-let landlord are still significant and have been rising for some time, most notably in the mortgage market where (as we know) rates have been on the up, and are likely to keep moving in this direction for the foreseeable future.

Plus, this remains a very long-term investment decision, one that still comes with a significant stamp duty surcharge, and one that needs to be looked at in the round, rather than just in the context of this most recent announcement.

On the positive side, if it can help usher in a greater level of supply to the PRS over the course of its duration, then it is definitely to be welcome but will it make a big enough difference? For far too long we’ve seen a series of measures – all still in place I might add – that have effectively forced landlords out, which is why we have seen demand outstripping supply by such margins, why rents have been on the rise, etc.

That migration of landlords needs to be reversed, however, I’m not sure this slight stamp duty cut will do this, and it remains the case that the owner-occupation space remains far more of a political priority than that of the PRS.

The ambition and long-term interest in property investing remains there for many existing landlords, but it remains to be seen whether we can bring in the new blood required to meet that growing supply gap. Stamp duty cuts for landlords are not to be sniffed at, but when you add in all the additional costs of buying an additional property, they are unlikely – nor should the be – the determining factor in such a decision.