Stamp Duty reforms and property investments

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2 Jan 2015

Stamp Duty reforms and your property investments

Author: Michael Cook

During December’s Autumn Statement, Chancellor George Osborne announced that the Stamp Duty Land Tax will change, describing the system as a “badly designed tax on aspiration.”

This reform should have a positive impact on the private rental sector, and may lead to investors growing their portfolios during 2015.

Until now home buyers and investors have paid Stamp Duty Land Tax (SDLT) on the entire purchase price of the residential property. With the new reforms a progressive structure has been put in place, similar to income tax, which Osborne says will benefit 98% of home purchasers, a tax cut worth £800m a year.

Michael CookThe reforms have been welcomed by the majority of buyers and investors” comments Michael Cook, Assistant Managing Director of Lettings at Romans. “They offer a much fairer system to how Stamp Duty Land Tax is calculated.

“The reforms offer private landlords lower costs when they buy investment property, making buy-to-let investment more manageable from the outset. I believe this will not only attract more people to invest in property during 2015, but also tempt existing landlords to grow their portfolios.

“This, in turn, will result in more properties coming onto the rental market, offering tenants in our area more choice.”

The new reforms are:

  • No SDLT payable at all on properties up to £125,000
  • The first £125,000 on properties to be free of SDLT
  • Then payable at 2% payable on the portion up to £250,000
  • Payable at 5% on the portion up to £925,000
  • Payable at 10% on the portion up to £1.5m
  • Then payable at 12% on the portion over that amount

The majority of investors in the South East purchase property priced between £200,000 and £300,000; this bracket offers some of the best Stamp Duty savings with the new reforms. If you bought three properties priced at £275,000 each, with the new reforms you will pay £11,250 in Stamp Duty Land Tax, a huge saving of £13,500.

“The savings landlords can now make on Stamp Duty Land Tax will also mean they have more budget for either buying a higher specification property, or making property improvements and general wear and tear maintenance, another positive for tenants” adds Michael.

For further advice on property investment in 2015 and how the Stamp Duty reforms could benefit your portfolio, talk to the lettings team at your local Romans branch, or request an up to date rental valuation.

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