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Are Buy To Let Landlords Toughing Out The Stamp Duty Squeeze?

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Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Are Buy To Let Landlords Toughing Out The Stamp Duty Squeeze?

At the end of last year, I wrote an article on this ‘blog which analysed a number of different sources of information relating to the private residential rental sector.

They all appeared to show that a succession of initiatives designed to improve the prospects for first-time buyers had, as a result, prompted a number of landlords to leave the ‘buy to let’ sector.

Chief among those measures was arguably the introduction in 2016 by the then Chancellor of the Exchequer, George Osborne of a three per cent Stamp Duty (SDLT) surcharge for those existing homeowners looking to purchase further properties.

Since the start of this year, the decline to which I referred in December seems to be accelerating, at least if the latest figures from the banking trade association, UK Finance, are anything to go by.

It has claimed over in the last three years, buy-to-let lending has fallen by half, with the volume of monthly mortgages being granted to so-called ‘dinner party’ landlords now roughly one-third of what they were before the global recession hit in 2008.

So Far, So Bleak. Government Policy & UK Buy to Let Industry…

Nevertheless, in trying to establish more of a complete picture about the degree to which Government policy has impacted on the ‘buy-to-let’ sector, I’ve found myself examining data which, although not providing a ray of hope for landlords, do suggest that they may have more resilience than some people have given them credit for.

Every quarter, the Bank of England releases what are known as Mortgage Lenders and Administrators Statistics, based on information provided by about 340 regulated mortgage lenders and administrators. The most recent edition was published only last month.

Delving into fine detail stretching back to the very start of 2007, a series of illuminating conclusions emerge.

The data would suggest that official action to foster first-time buyer numbers is working. Men and women taking their first steps on the housing ladder accounted for just over one-fifth of all mortgages issued in the last quarter of 2018, whereas they made up one-eighth back in 2007.

At that point, they were broadly similar to the numbers of buy-to-let mortgages granted and have certainly become more common.

Perhaps one surprise, however, is that despite the measures put already in place to extract extra cash from those wanting to purchase additional homes, the proportion of mortgages granted to those individuals over the period covered by the Bank of England has actually increased – from one-tenth to one-eighth.

B2L, HRAD, Mortgages & SDLT…

Yes, the sector has weathered some challenges (the recession saw ‘buy-to-let’ mortgages amount to just over five per cent of all mortgages issued in the third quarter of 2009, almost a quarter of the percentage – 21.44 per cent – at the start of 2016) but it still represents 12.52 per cent in the last quarter of 2018.

It’s also worth consulting the latest SDLT figures issued by HMRC.

Even allowing for the devolution of Stamp Duty to Wales this time last year, the receipts during the last quarter of last year were up three per cent on the previous three months to nearly £3.3 billion ().

Furthermore, the number of house purchases in which the Stamp Duty surcharge – or, Higher Rates for Additional Dwellings (HRAD), as its formally known – was applicable also increased by three per cent, bringing in just over a billion pounds.

That might still be a drop on receipts during the same period in 2017 but, says the Revenue, is at least partially due to the amount of refunds made to those who are entitled to claim if they sell their previous main residence within three years of coughing up HRAD.

It turns out that purchases in which the surcharge is paid have made up one-third of all transactions involving Stamp Duty over the last year and are on the increase.

All that begs the question about whether the future for the ‘buy-to-let’ sector is as horrid as some commentators have forecast.

The Treasury’s squeeze may well have proven too much for a proportion of landlords but it appears that some are undeterred.

For the time being, I reckon it would be unwise to write the ‘buy-to-let’ sector’s obituary. Given the important role which it plays in providing homes to those families whose needs can’t be matched by available housing stock, that’s not necessarily a bad thing either.

If you are a buy to let investor and have any queries about this article or property tax in general then please get in touch or read more about property tax below

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