Stamp Duty Land Tax and Landlords

From April 2016, Stamp Duty Land Tax will be 3pc higher if you buy a second property as a buy-to-let investment, raising a predicted £1bn by 2021. The extra charge applies above the current Stamp Duty Land Tax rates. Ouch!

Stamp Duty Land Tax and Landlords

This change comes hard on the heels of George Osborne’s other recent change for landlords – the gradual removal of landlords’ ability to deduct interest at their highest rate of tax. (This meant that landlords would only be allowed deduct interest equivalent to the basic rate, which will leave hundreds of thousands of landlords having to pay tax, even though they might well be making a thumping loss on their let properties – which makes them a unique group for tax).

Landlords may be wondering why they have been singled out for this uniquely harsh treatment.

After all, it hardly seems like joined-up government from Osborne. First he allows people to take cash from their pensions. Naturally, many folks said they might put it directly into residential property investments. All good. Then, the sudden about-turns.

All of a sudden Osborne is a landlord’s worst enemy – almost desperate to lose their million odd votes.

But why the change?

Well, we think he has been got at from two sides.

Generation Rent

On the one hand, pressure group (and Nationwide Building Society’s “Foundation” funded) Generation Rent have been increasingly supported by Conservative voting Mums and Dads, moaning that their offspring cannot buy a pad in South Kensington or Islington and were going to have to slum it by buying in and commuting from Sidcup or Isleworth instead. And it was all the fault of the pesky landlords.

On the other hand, the institutional investors such as Aviva, Legal & General as well as overseas banks and corporates have long eyed a piece of the private rented sector action. Unable to compete with the more efficient “buy to let Mom and Pop landlords” they have urged for a playing field where they get to kick downhill with the wind behind them.  They have now got their wish. (Special exemptions mean they won’t be affected by the SDLT change).

And, after all, it is hard to be cross with as amorphous and distant a landlord as Legal & General or Aviva or some foreign concern, probably registered in the Bahamas, perhaps.

And with Jeremy Corbyn lurching ever more leftwards, where are oft-Conservative voting landlords to go anyway? So, he’s taken his chance to hit what for many people is an unpopular group lacking in support and funding.

At LettingFocus, we have always predicted that the regulatory and tax environment facing landlords would get tougher.

And though landlords outside the capital have long battled with struggling house prices and rents that have barely moved for years, it is inside the capital where things really count. The big increases in house prices and future capital gains for landlords in most of London in the last 5 years has led Mr Osborne to eel that he can act.

Landlords who have already built a portfolio may feel less depressed as there will certainly be less new entrant small landlords (though we think the institutional investors will now see the green light and will really ramp up their game).

But whichever way you look at it, this seems like an attack on small scale landlords.

Other Links:

See also this for my views on the ghastly flats being built by the institutional investors:

https://www.lettingfocus.com/blogs/2014/10/build-to-let-hype-or-fact/

…and this on the links between Generation Rent and the “not always supportive of tenants”, Nationwide Building Society:

https://www.lettingfocus.com/blogs/2014/12/nationwide-foundation-generation-rent-odd-bed-fellows/

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