The shifting Stamp Duty boundaries….what does this mean for an investor?
In the last few weeks there has been much reporting on the Chancellor Kwasi Kwarteng’s mini-budget and the effects it has on the country. The main implication for investors that has arisen from this budget is the new boundaries for stamp duty. If you are looking to invest in a buy-to-let property what are the implications for you?
Stamp Duty
Let’s start with the basics. What is stamp duty? Stamp duty, to give it its correct name – Stamp Duty Land Tax (SDLT) – is payable if you buy a property or land over a certain price in England and Northern Ireland. In general terms, the Chancellor confirmed that the Nil Rate band for stamp duty will rise from £125,000 to £250,000 from 23rd September 2022. However, if you are considering purchasing a second property, such as a buy to let investment, you will be subject to the Additional Stamp Duty Rate in England and Northern Ireland which is a minimum 3% extra charge on top of your standard stamp duty bill.
What does this mean in reality?
So, in practical terms, there are some savings to be made. If you are a looking to buy a property for £250,000 you will now be paying £7,500 in additional stamp duty, rather than the £10,000 previously required. This gives you a saving of £2,500.
You can calculate how much stamp duty you will need to pay on a specific amount by clicking here. More general information about the Stamp Duty Land Tax and be found here.
Demand outstrips supply.
However, is it a good time to invest in a property just because of the rise in stamp duty boundaries, especially when you consider that a rise in interest rates might negate any savings made through the cuts in SDLT?
If you consider a recent survey by SpareRoom it suggests that demand is outstripping supply. According to their research, prospective tenants looking for rooms to rent in London now outnumber the number of rooms available in the city seven to one. This trend is echoed by Foxtons who state that for every rental ad placed, 22 applicants are looking to rent it out.
So maybe it is a landlord’s market. Investing in properties has, historically, always been a very stable asset which offers good returns, and while it is unclear what the future holds, bricks and mortar may well be the place to be.
If you wish to discuss investing in properties, particularly HMOs and how Reka Property Management can help you capitalise on your return on investment, please speak to us today.
Disclaimer: Reka Property are not financial advisors, and the information above is of a general nature and may not relate to your individual circumstances.
