What does the Stamp Duty Holiday mean for Property Investors?

On 8th July 2020, the UK Government announced a ‘stamp duty holiday’ on purchases of up to £500,000 for buyers in England and Northern Ireland. This is set to remain in place until 31st March 2021, creating significant savings for around 90% of buyers. But how good is this news for buy-to-let investors?

The stamp duty holiday has undoubtedly stimulated the market- enabling buyers to make substantial investments at a cut price. Nonetheless, no property investor should assume that stamp duty can be removed from their financial calculations completely as both buy-to-let, and second home purchases still attract a 3% surcharge that is excluded from the stamp duty holiday.

What are the current stamp duty rates for buy-to-let purchases?

In England and Northern Ireland stamp duty rates for buy-to-let and second homes bought between 8.7.2020 and 31.3. 2021 are currently set at:

Portion of property price   Stamp duty rate
£0-£500,000 3%
£500,001-£925,000 8%
£925,001-£1.5m 13%
£1.5m+ 15%

Please note: Different rules and rates apply in Scotland and Wales – please check the government website for more details.

If I am purchasing a buy-to-let or second home can I still save money?

Despite the 3% surcharge, if you are intending to buy a second home or buy-to-let property in England or Northern Ireland, you can still make a significant saving if you complete the purchase before 31st March 2021.

Under normal stamp duty tax rules, buy-to-let and second home investors would pay 6% tax on a property worth £500,000 –a tax of £30,000.  (The exception to this is first time buyers who are investing in buy-to-let property – they will be treated as buy-to-live purchasers.)

The stamp duty holiday means buy-to-let, and second home investors now only pay 3% tax on a property of this value. The surcharge value alone can result in savings of up to £15,000.

At Modus Accountants, we are specialists on all things property. Having worked with and alongside property developers for years, we know how to make the most out of your investments. If you are considering an upcoming property investment, we can help. You can arrange a free session with our experts here.

How will the new stamp duty rules impact buy-to-live buyers?

The purchase of a buy-to-live property in England and Northern Ireland attracts stamp duty as follows:

Portion of property price       Normal Stamp duty rate       Stamp duty rate 8.7.2020 – 31.3.2021
£0 to £125,000 0% 0%
£125,000 to £250,000 2% 0%
£250,000 to £500,000 5% 0%
£500,000 to £925,000 5% 5%
£925,001 to £1.5 million 10% 10%
£1.5 million+ 12% 12%

As the table shows, the stamp duty holiday is excellent news for those purchasing a property up to the value of £500,000.  If you are becoming a homeowner, moving up or moving down the housing market within this bracket, you are exempt from paying stamp duty.

Now is the time to save!

With the end of the scheme quickly approaching, if you have been eyeing up a potential investment (as a buy-to-live or buy-to-let) now is the time to take the plunge and secure some savings. Just ensure you factor in the 3% surcharge that still applies if you are looking at buy-to-lets and second homes.

If you are considering an investment but need more time and are keen to see this scheme remain in place until September 2021, you can sign the petition for the extension of the stamp duty holiday here.

Interested in hearing more about the effects of the stamp duty holiday on your investments? Check out our videos with our property expert Imran here.