Published: 10/07/2020 By James Pickford Financial Times

Buy-to-let investors were handed a surprise boost in the chancellor’s summer statement as tax savings from the stamp duty holiday will also apply to landlords who expand their property portfolios or incorporate as a lettings business. The chancellor, Rishi Sunak, aimed to revive confidence in the post-lockdown property market by lifting the threshold at which stamp duty kicks in from £125,000 to £500,000 in England and Northern Ireland. The new threshold took effect on Wednesday and will run until the end of March 2021.  Although property investors and second homeowners must continue to pay a 3 per cent stamp duty surcharge on purchases, they will pay no further duty on the first £500,000 of the property’s value.  For an investor buying a £500,000 property, this would halve the rate of duty payable from £30,000 to £15,000. Steve Olejnik, managing director of mortgage broker Mortgages for Business, said it was “great news” for landlord investors, and was also likely to lead to a rise in individual buy-to-let landlords transferring their properties to a limited company structure to take advantage of tax relief on mortgage interest, since a transfer would normally incur a stamp duty charge.  “Those looking to move personal property into a company name because of better tax treatment may have been reluctant to do so because of the stamp duty implications,” he said. “Clearly that cost is lowered now.”  First-time buyers, who were previously exempt from paying stamp duty up to £300,000, will lose their special status during the holiday, paying the same rates as ‘next time buyers’ and those who are downsizing. Overall, the Treasury estimated that the changes meant nine out of 10 purchasers would pay no stamp duty, with an average saving of £4,500. Neal Hudson, director at market research company Residential Analysts, said the move marked a substantial reversal in housing policy. “The previous focus on first-time buyers and home ownership has been set aside and the priority now appears to be supporting transactions, irrespective of who is buying,” he said. Extending the stamp duty holiday to landlords was a surprise, as investors have been hit by higher taxes and tighter restrictions on borrowing in recent years.  Aneisha Beveridge, research director at estate agent Hamptons, said the average stamp duty bill for an investor would fall by £1,840, or 22 per cent, in England. But the gains were greater in London, where one in five landlords spend more than £500,000. There, the average stamp duty bill for an investor will fall by £7,240, or 26 per cent, she said. A stamp duty holiday is designed to boost the market in several ways. Buyers are in a better position to qualify for a mortgage as reduced stamp tax allows them to wield a larger deposit. Sellers are more likely to come to the market during the time-limited period when they believe buyers have more money to spend, improving the stock of housing available to buy. The measure may also help those looking to remortgage if it succeeds in boosting demand, underpinning property valuations.  In a nervous market in which buyers are worried about the economy ahead of the closure of furlough schemes in the autumn, the stamp duty holiday may also stiffen the resolve of sellers who had felt pressure to offer price discounts. Marc Selby, chair of the property taxes committee at the Chartered Institute of Taxation, said: “This cut should help to revive the housing market, but the jury is out on whether it will mostly benefit buyers or sellers. In practice, it may simply stabilise prices.” The benefits will be concentrated on areas of higher average house prices, such as London, the south east and south west. Estate agent Savills identified the local authority areas which will see the biggest falls in stamp duty receipts, based on previous sales figures, top of the list being Wandsworth (with a fall of £40m), Bromley (£35m) and Wiltshire (£29m). According to Rightmove, the property website, the average saving in the north east will be £646, versus £15,000 in London.  While the quadrupling of the threshold at which duty applies is likely to boost activity at a time of economic uncertainty, some experts expressed concern about the effect of the March 2021 deadline. Helen Miller, deputy director of the Institute for Fiscal Studies, said: “If the economy is still not recovered and if people have bought forward transactions, this could lead to a depression of housing sales while the economy is still weak.” The policy change may have come as a surprise to those currently going through the home buying process, but lawyers were confident that buyers in England and Northern Ireland who had exchanged contracts would still benefit, since stamp duty is only payable on completion of a purchase. Transactions that completed on 8 July would also be eligible for the discount.