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The spotlight on stamp duty – where can landlords seize further savings?

Nathan Goodridge | 19.08.2020

Over the last five years, landlords have seen a number of significant changes made by the UK Government. Following a series of regulation changes many landlords have taken a second look at how they manage their property portfolios. And it’s no surprise that the challenges of 2020 may have caused them to do the same. Due to these factors, some landlords may have chosen to exit the market whilst others have looked at how they might diversify their portfolio. This is when landlords will most likely look to you, their mortgage broker, for advice and support.

Rishi Sunak, Chancellor of the Exchequer, announced changes that homebuyers won’t pay any tax on residential homes worth up to £500,000 until 31 March 2021. Whilst the 3% additional property surcharge will still be levied, the further relief is welcomed by landlords. Before the Chancellor’s announcement, a landlord looking to purchase a buy to let property of £500,000 would’ve been expected to pay £30,000 in tax. With the new changes, this would be reduced to £15,000. However, be aware of the potential of a bottle neck of cases as we enter 2021 with everyone wanting their case to complete before the deadline.

These changes are positive for landlords who are looking to grow their portfolios, and it’s also important that they consider their personal financial circumstances now and look ahead. The end of the year is approaching fast and it won’t be long before the true economic picture is realised.

How will the constantly evolving situation affect your landlords as well as their prospective tenants? This is where intermediary advice will be paramount moving forward. These areas need to be discussed plus covering all of the other potential relief available, such as multi dwelling relief. Multi dwelling relief is not particularly well known but it could prove to be very welcome if your customer qualifies.

Multiple Dwellings Relief (MDR)

Note: the below content has been prepared for general informational purposes only. If your client needs specific advice, please encourage them to speak to a tax advisor.

You may know this already but a landlord could claim relief when they buy more than one dwelling where a transaction or a number of linked transactions, include freehold or leasehold interests in more than one dwelling.

If a landlord can claim relief they can work out the rate of tax HMRC charge1 by:

  • Dividing the total amount paid for the properties by the number of dwellings
  • Working out the tax due on this figure
  • Multiplying this amount of tax by the number of dwellings

The minimum rate of tax under the relief is 1% of the amount paid for the dwelling.

To bring this to life further, here’s an example:

Vicky is a property investor and is purchasing three flats from a builder at a price of £300,000 each and an HMO from the same builder of £600,000, totalling £1,500,000.

The transactions are linked and assuming that there is no claim for MDR, the Stamp Duty Land Tax (SDLT) payable by Vicky would be as follows:

But, if Vicky were to claim MDR, she would only have to pay:

£1,500,000 divided by 4 properties = £375,000

So this could be an option that Vicky might want to explore further due to the potential savings she could make on her property portfolio, and that’s where intermediary support and advice from a tax professional will be vital.   

How we can help?

We’re known as experts in the more involved buy to let market and we manually assess every case with a specialist underwriter. For limited company buy to let, we’ll allow up to four directors on an application and will allow children on as shareholders. We’ve no limit on the amount of properties we’ll consider in a portfolio. Our buy to let hub which uses the e-tech system will take care of verifying your customer’s portfolios.

With our help you can get more of your limited company cases completed. Contact your senior business development manager today, or call 01634 835791 to speak to the broker liaison team, they’ll be happy to help.


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