What a doubling in stamp duty bills will mean for you and your clients

Brokers need to ready themselves for April. It brings with it some notable changes that will have a profound impact on the property market, and investors. These changes will necessitate adaptation, and brokers, alongside lenders and advisors, will have their role to play.

Let’s start with the obvious – stamp duty. From April 1st, the nil-rate band on SDLT for main residence will drop from ￡250,000, to ￡125,000. At the same time, first-time buyer relief is being cut. When you factor in the new surcharge on second homes/buy to lets, all this translates to much more densely filled government coffers.

I wouldn’t want to guess what your clients’ bills will be come April. That’s a job for the accountants, and the SDLT calculators. Chances are though, property investors are set to see their costs skyrocket.

Sadly, recent analysis from JLL revealed stamp duty bills for landlords will almost double in the new tax year, jumping from ￡8,452, to ￡16,190. This will equate to 13 months’ worth of rent from April, based on average BTL property prices.

It doesn’t seem like there will be much reprieve outside of stamp duty concerns either. Mere days after the stamp duty nil-rate band cut, beneficial tax treatment for Furnished Holiday lettings (FHLs) will be abolished, and other incentives will be limited.

As BDO explains: “mortgage interest on FHLs is currently treated as a deduction from rental income for income tax purposes. From April 2025, relief will instead be given as a 20% tax credit for higher and additional rate taxpayers. This means a reduction in tax relief for individuals from 40% and 45% respectively.

Capital Gains Tax on disposal of FHLs may currently qualify for?Business Asset Disposal Relief (BADR), where the first ￡1m of lifetime gains are taxed at 10%. Alternatively, the gain can be ‘rolled over’ on purchases of certain new business assets.?

From April 2025, the normal residential property CGT tax rate - currently 24% - will apply, and the ‘rollover’ of gains will no longer be possible. This is a hard deadline - there are no transitional rules, no matter how long an FHL has been operated as a business.”

Also, there are other tax changes on the periphery that will add pressure in some way shape or form. Frozen income tax and NI thresholds, council tax hikes, frozen IHT thresholds, and more will undoubtedly force some to reconsider their priorities over the coming months.

So, what are we likely to see? Holiday-let owners could shift to more traditional rentals, sell their FHL to a new or existing SPV or sell-up altogether for a start. In fact, nearly a third of landlords are looking to reduce their portfolios in the face of Labour’s reforms, according to the English Private Landlord Survey of landlords. Some 16% aim to sell all their properties.

Others may be tempted to look into alternatives. The Renters’ Rights Bill and Awaab’s Law could push some into the commercial market – perhaps for the first time. The good news is Market Financial Solutions can assist with this as we’ll allow first time commercial landlords to access our commercial and semi-commercial products.

We may also see a shift in how borrowers go about investing too. For instance, last year we saw a record number of landlords set up limited companies/SPVs to purchase BTL properties, likely trying to be more tax efficient. ?The same could be true of landlords looking to purchase existing SPVs rather than the properties within using a share purchase agreement.

There’s plenty of change incoming and brokers will need to be ready for the challenges their clients bring to them. Thankfully, we here at Market Financial Solutions can help with their looming predicaments.

Should we see landlords sell up from April for example, we can deliver funding quickly to help expanding landlord investors take advantage. Moreover, across our products, we can work with trading limited companies, SPVs, purchasing existing SPVs using a SPA, trusts, and many other kinds of corporate set ups looking to purchase in England and Wales.

We have approximately two- months. Let’s prepare now!