Please Note: This Article is 3 years old. This increases the likelihood that some or all of it's content is now outdated.

In the Autumn Statement George Osborne has made it clear that small-scale private landlords have been on to a good thing and will not have it so good in the future.

It’s also a good opportunity, as the Chancellor sees it, to placate “generation rent” giving them a leg-up onto the housing ladder, by creaming off the top some of the buy-to-let investors’ profits.

A 3% Stamp Duty (SDLP) levy is to be applied, on top of the exiting SDLP rates, to every buy-to-let and second home purchase.

Britain’s small army of private landlords, the vast majority owning just one or two private lets, came in for a barrage of negative media hype and anti-landlord campaigning coming up to the May election. Some of this sentiment seems to have rubbed off on George Osborne and incorporated in his political manoeuvrings behind these tax changes.

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Mr Osborne knows that a large swathe of the electorate, generation rent and their parents, are extremely concerned about the price of houses, and the difficulty for young people to get onto the property ladder. This problem is not confined to Britain: affordability is a world-wide issue.

Rebalancing the housing market, by taking money off successful buy-to-let, and channelling it into house building for young home buyers, looks like a clever political ruse.

Favouring large-scale corporate landlord investors over the “cottage industry” small-scale landlord, with large tax incentives, looks like it’s the way things are going under George Osborne.

So, with a raft of new letting regulations introduced earlier this year, the upcoming Right-to-Rent checks due next February, the removal of mortgage interest relief along with an annual expenses charge, new mortgage restrictions for buy-to-let loans coming soon, and now this SDLT levy – you have a cocktail of measures enough to dampen the enthusiasm of the most optimistic landlord.

There are estimated to be around 1.5m people in the Britain who are small-scale landlords of one stripe or another, and the private rented sector has doubled in 15 years, now housing nearly 20% of all households.

The industry, and that’s what it is, matching the asset value of the motor industry, has gradually gathered momentum since the Conservatives under Margaret Thatcher deregulated the tenancy laws in 1988. They removed rent control and eviction restrictions by introducing the shorthold tenancy.

Then came the inability of the older “baby boom generation” to find decent returns and security in other forms of investment, pensions and annuities. This brought rental property to centre stage as the ideal safe form of investment. It fuelled a boom in asset prices which kept on increasing; more and more people saw the benefits of becoming a landlord.

The ultra-low interest rates that following the 2008 recession, and the demand for renting from a generation of young people who could not afford to buy, created a perfect storm. It was a rush for those buy-to-let mortgages which became ever easier to obtain, and a rush for those same properties that first time buyers were after.

It’s perhaps understandable then that government is getting concerned about the risk to financial stability from booming demand and rising house prices. It duly prompted these measures to cool the enthusiasm of would-be landlords. George Osborn must also be concerned about the political risks of excluding more and more young people from home ownership.

The Association of Residential Letting Agents (ARLA) has called the measures “catastrophic” for buy-to-let landlords. Whether that’s the case long-term remains to be seen. But the additional 3% stamp duty, payable within a month of a property purchase, rather than by the end of the tax year, is a real blow, on top of everything else.

According to Jennet Siebrits, head of residential research at CBRE, the global estate agency, quoted in the Financial Times (FT), this new surcharge could add between £3,500 and £7,500 to the cost of a £250,000 property, and it is expected to raise £625m in 2016-17, rising to £880m in 2020-21.

Mortgage brokers are now expecting an unprecedented rush to buy and secure low interest buy-to-let mortgages before April 2016. Once the measures are fully implemented there is an expectation by the Treasury they will have a “material effect on house prices”.

Richard Lambert, chief executive at the National Landlords Association, told the FT the chancellor wants to “choke off future investment” in buy-to-let, private properties to rent, in what he described as “an attack on small private landlords”.

However, the Treasury have acknowledged there will be uncertainty over the amount of revenue the SDLT levy will raise, given that it is basically dependent on purchaser’s honesty: that the dwelling they are buying will not be their primary residence. Enforcement could have its problems.

The stamp duty surcharge will not apply to companies or property investment funds making “significant” investments in residential property, more than 15 properties is the figure that’s been suggested.

Some lenders think that landlords will consider switching to owning through a limited company or companies in future. These may not be liable for SDLT but would attract corporation tax, plus taxes on dividends when the directors withdraw money from the company.

The usual refrain after a budget is about winners and losers; this time there’s absolutely no doubt at all: buy-to-let landlords are the losers, and perhaps the house building companies will be the winners?

Please Note: This Article is 3 years old. This increases the likelihood that some or all of it's content is now outdated.
©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law, always seek professional advice.

11 COMMENTS

  1. again a kick in the teeth for us landlords.Because of lack of help from the gov. and most tenants genned up on the law ,which is in their favour, to dupe us landlords out of rent and leaving our houses in a terrible state, when my houses have become empty i have not relet and although paying full council tax ,mortgage,standing charge on utilities,i have 3 out of 7 houses empty and have not noticed any difference in my income ,up to now.I would get out of the business of house letting tomorrow if i could.And have never made any decent money out of letting.My houses are all down in value by around 20-30% and were my pension ,thanks to bad government decisions re credit crunch. jeff whittles. not happy

  2. I see so many hate comments aimed at the small private landlord which are little more than envy. I could even understand that as simply human nature, if I didn\’t personally know people living under corporate landlords. I\’d like to think I treat my tenants much better than I am seeing my friends being treated.
    It\’s clear to me that yet again this government is favouring the big boys, and that won\’t be in the interests of the tenant, but it will be popularist because too many people are blinded either by envy or isolated anecdotal bad experience to really think through what is happening here. I predict in 20 years\’ time we\’ll have swathes of people bemoaning the tyranny of large corporate landlords, but it will be too late by then.

  3. In the main the only way a renter has ever been able to afford to buy is by getting together with a partner, saving hard over an extended period of time, not taking holidays, not buying luxury goods, not smoking, not drinking, not having children until there was sufficient income to cover the costs. This attack on private landlords is an attack in the main on such aspirational renters who have gone on to own their own homes and become landlords. There is no reason to believe that these measures will do anything to change the behaviour of those renters who are not aspirational. Nobody will lend them the money to buy their own home unless they can demonstrate their ability and willingness to repay the debt. Even if these measures lead to a reduction in house prices there is no reason to believe that this will increase the amount of home owners as is evidenced by the lack of any noticeable change in the balance of home ownership when house prices tumbled in 2007. The only plausible explanation for these measures being introduced is on the one hand to move rental property from private ownership to corporate ownership and on the other hand to raise short term tax revenues to help pay for subsidising people to work (i.e. tax credits). The losers are predominantly hard working individuals running small property businesses providing good quality residential accommodation at a competitive rent in return for a modest living and a pension vehicle. The winners are the treasury and the corporate sector investing in property. There is no reason to believe that these measures (which are nothing more than a tax raid reminiscent of the Greek Cypriot government raid on private ban accounts) will have any effect on the average renter or indeed on the productivity of the UK economy.

  4. I went to the Citizens Advice Office about this!
    There was a note on the door saying \”Emigrate!\”
    They,ve all cleared off!
    What chance have WE got!
    Ron Crane
    Bournemouth.

  5. Shame that small landlords like us are treated so badly while the Tories continue to favour and help the big companies get richer and do what they want.

    I am selling up and putting my money in overseas BTL. Dubai, Malaysia, Thailand, Sri Lanka offers tremendous ROI and without the litany of regulations by David and his cronies in Govt

  6. Ok l am an accidental landlord having got on my bike ( well in my company car) and moved for work each time northwards to cheaper housing and thus kept old home

    Under this situation wouldn\’t pay the extra sdlt with 5 houses and a small pension l haven\’t paid income tax for 4 years since retiring and with £400k of int only mort my actual life nome is pretty modest My big worry is CGT as houses are in south and Midlands and Gain on one alone £250k

    To because at age 66 l pay no nic my idea was a limited closed company but this plan contrary to your article is aff coming ed by the3 % as THE NEW COMPANY WOULD PAY SDLT ON TRANSFER – effectively buyers of the houses from me ouch that\’s £26k and if CGT is still levied a loss l can\’t claim back. ISNT THATVTHE REAL IDEA TO STOP SMALL LANDLORDS CONVERING TO COMPANIES AT RETIREMENT

  7. So, 500pm rent, interest rates rise & costs reach 400pm; so gross profit 100pm. But tax relief is just 20% on the 400 so 80 from 40% of 500 is 120pm tax from 100 profit, so overall loss of 20. What landlord in their right mind declare anything now?!

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