The Chancellor has not wasted anytime increasing stamp duty for second home owners with the higher rate of 5% in force from 31 October 2024
The current 3% stamp duty land tax (SDLT) will increased to 5% from 31 October 2024 on purchases of second homes, buy-to-let properties and companies buying residential property.
On the positive side, the temporary 4% cut in capital gains tax to 24% for landlords will be extended on a permanent basis, instead of ending it in April 2025.
Buy to let landlords face another challenge as a result of the increase in the SDLT higher rate – the sector is rapidly becoming one for professional landlords, buying properties “in bulk” from developers, who can benefit from the economies of scale and commercial rates of SDLT.
Landlords with a couple of properties held in their own name will welcome the freezing of the CGT rate on the sale of their properties at a maximum of 24% and may well be considering that this is the time to sell.
Reeves said this measure was to give first time buyers and those that are moving an advantage over landlords and business purchasing residential property. It will also impact non-UK residentials buying additional property in the UK.
Reeves said in her speech: ‘This will support over 130,000 additional transactions from people buying their first home, or moving home, over the next five years.’
Purchases by corporate bodies of properties over £500,000 will also be increased to 17%, an increase of 2%.
However, the move signals another hit on the buy to let market.
This is another nail in the coffin of buy-to-let. Transactions in process are now at real risk as investors may well pull out and this will have a negative impact on any property chains where a buy-to-let is involved. This is going to have a further negative impact on UK housing stock, pushing rents higher.
The measure is expected to raise an additional £115m in the remaining five months of the 2024/25 tax year. In 2025/26 this is expected to bring in £90m, £170m in 2026/27, £255m in 2027/28 and £310m in 2028/29, raising £940m in five years.
The Treasury policy costing report stated: ‘The costing assumes that a proportion of the disincentivised higher rates transactions will be displaced by primary residence transaction.’