We use cookies to track usage and preferences.

What are the implications of the Chancellor’s Summer Statement for buy-to-let landlords? 

calculator.jpg

Originally published on WhatMortgage.co.uk.

Chancellor Rishi Sunak unveiled a range of packages to help the economy in his Summer Statement this week, with particular support for the housing market. Two elements will be of particular interest to landlords – a Stamp Duty Land Tax reduction and new Green Homes Grants for home improvements.

Our Mortgage Sales Director, Moray Hulme takes a look at the implications of both.

Stamp Duty Land Tax

The Chancellor announced a that he was raising the Stamp Duty threshold on residential property transactions from £125,000 to £500,000. This will run from 8 July 2020 to 31 March 2021 and means that home buyers purchasing a property up to £500,000 will pay no Stamp Duty.

For buy-to-let landlords, the 3% surcharge introduced in April 2016 remains, so whilst they will see their Stamp Duty bills reduced, it’s not as good news as for homebuyers.

Before, landlords would pay 3% SDLT up to £125,000 of the property’s value, 5% between £125,000 and 8% between £250,000 and £925,000. Between now and 31 March next year, landlords will pay a flat 3% of the transaction value up to the £500,000 threshold.

Property price

SDLT rate

SDLT additional property rate

Up to £500K

0%

3%

£500k to £925k

5%

8%

£925k - £1.5m

10%

13%

+£1.5m

12%

15%

Our analysis shows that this will typically benefit those landlords in Southern regions more as property prices are higher in those regions, particularly London and the South East.

Prior to the Chancellor’s Stamp Duty announcement on July 8, a landlord buying a property in the North West at Paragon’s 2019 average property price of £170,191 would pay £6,009 in Stamp Duty. A landlord in London buying a property at the average price of £578,167 would pay £36,253.

Following the Chancellor’s Stamp Duty holiday, the North West landlord’s Stamp Duty cost reduces to £5,105, with the London landlord’s tax bill falling by £15,000.

Region

Average BTL property value

Pre-SDLT holiday duty

SDLT holiday duty

Saving

London

£578,167

£36,253

£21,253

£15,000

South East

£343,946

£17,515

£10,318

£7,197

South West

£301,279

£14,102

£9,038

£5,064

East Anglia

£247,581

£9,879

£7,427

£2,452

West Midlands

£219,744

£8,487

£6,592

£1,895

East Midlands

£187,091

£6,854

£5,612

£1,242

Yorkshire & Humber

£178,218

£6,410

£5,346

£1,064

North

£172,986

£6,149

£5,190

£959

North West

£170,191

£6,009

£5,105

£904

Source: Analysis of Paragon 2019 data

Hamptons International has calculated that the average SDLT bill paid by buy-to-let investors across England will fall from £7,120 to £2,400, a reduction of 66%.

Green Homes Grants

The Chancellor also unveiled a scheme to help homeowners and landlords improve the energy efficiency of their homes and support the UK to become carbon neutral by 2050.

The Government will introduce a £2 billion Green Homes Grant, providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household.

For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household. In total, ministers say this could support over 100,000 green jobs and help strengthen a supply chain that will be vital for meeting our target of net zero greenhouse gas emissions by 2050. The scheme aims to upgrade over 600,000 homes across England, saving households hundreds of pounds per year on their energy bills.

The Green Homes Grant will cover a variety of energy saving home improvements. Whilst a comprehensive list has not been released just yet, some of the confirmed improvements are wall and roof insulation and double glazing.

Although full details have yet to be released by the Treasury, applications are expected to be open from September.

View our products

View our competitively priced fixed rate accounts currently available

1 Year 0.75%
AER*
Apply
2 Year 0.95%
AER*
Apply
3 Year 1.10%
AER*
Apply
5 Year 1.20%
AER*
Apply

*AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded on an annual basis.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551