Stamp duty changes – what do landlords need to know?

So between the mini-budget, u-turns and a new Prime Minister and Chancellor, what do landlords need to know about stamp duty changes?

Former Chancellor Kwasi Kwarteng's now infamous mini-Budget spooked the markets, saw the pound down to record lows against the dollar and sent mortgage rates soaring.

So, when his replacement Jeremy Hunt came in, he reversed almost everything straight away – only the stamp duty changes survived. This was mainly because they had already reached a stage in Parliament where it was too late to reverse and because, unlike nearly every other part of the fiscal address, the changes were widely welcomed.

As a result of the changes, the nil rate tax threshold was raised from £125,000 to £250,000, while the price at which first-time buyers now pay stamp duty was increased to £425,000 – up from £300,000 – so long as the home's overall cost is no greater than £625,000. This means that first-time buyers with an eye on more expensive first homes will likely pay no, or little stamp duty due to the changes.

At the time, the Government claimed that the cut would allow 200,000 more people to purchase a home every year without paying any stamp duty, equivalent to around 43% of all transactions.

It also said the cuts would reduce stamp duty bills across the board for all movers 'by up to £2,500 with first-time buyers able to access up to £11,250 in relief'.

The stamp duty cut applies to landlords, too, although landlords must still pay the additional 3% stamp duty surcharge on any purchases they make.

Landlords eyeing up a relative bargain – under £250,000 – will now pay less stamp duty on this purchase, but for those purchasing properties over a quarter of a million, there will be no benefit from the changes.

Some have suggested that the stamp duty cut could help inflate house prices further, preventing landlords from expanding their portfolios. On the other hand, those landlords looking to sell could benefit from higher prices and higher demand brought about by the stamp duty changes.

However, recent events – which have seen interest rates rocket and mortgage rates with it – plus the cost-of-living crisis and other issues could negate any savings landlords could make due to the changes to stamp duty.

Renters looking to buy their first home may have been cheered by the news that they won't need to pay any stamp duty up to £425,000. While all first-time buyers were already exempt from paying stamp duty on homes worth up to £300,000 before the mini-Budget, this means first-time purchasers in more expensive areas like London and the South East will more than likely not need to pay any stamp duty tax on their first home.

They will, however, still face challenges when it comes to purchasing a first home in terms of cobbling together a large enough deposit. Meanwhile, mortgage rates have soared since the announcement of the mini-Budget, which means mortgage repayments will be more expensive monthly than they would've been before the mini-Budget. It may also be a lot harder to find favourable mortgage deals.

Stamp duty brings in a lot of money to the Treasury. In the third quarter of this year, stamp duty receipts on residential properties hit a record high, according to Government figures. They reached £3.59 billion, up 21% from the previous quarter.

In the year to September, receipts were more than £12 billion, 28% higher than their pre-pandemic 12-month high of £9.47 billion set in 2017.

In November's Autumn Statement, the Chancellor announced that the stamp duty cuts would end in March 2025. It is to remain in place until then due to expected slow activity in the market.

A big part of the stamp duty receipts come from those at the top end of the market and the buy-to-let and second home owners who must pay the extra 3% surcharge (the latter delivered £528 million to the Treasury in the 12 months to September). And the rates for these haven't changed.

Although there are forever calls for stamp duty to be scrapped completely, and some say the rates should be higher than they currently are, stamp duty has played a major role in a number of recent major fiscal addresses, so for the foreseeable future, the Government may focus on other priorities that will take precedence, so there shouldn't be any more changes for some time.