Buy to Let Investment Heading North on Stamp Duty Hikes

Rachel Reeve’s first budget on 30^th October 2024 included an increase in the additional surcharge on 2^nd homes, holiday lets and buy-to-lets (BTL) from 3% to 5%. 

Successive hits to 2^nd property ownership:

• 2010 - Alistair Darling (Labour) – increased CGT rates on 2^nd property to 18% for basic rate taxpayers and 28% for higher rate taxpayers.
• 2016 - George Osborne (Conservative) – introduced the original 3% additional stamp duty surcharge.
• 2022/2024 - Rishi Sunak (Conservative) legislated to allow local authorities to double council tax for 2^nd homes and holiday homes (not BTLs with assured shorthold tenancies from 2025.
• 2023 - Rishi Sunak (Conservative) – reduced the capital gains tax annual exemption to £6,000.
• 2024 - Rishi Sunak when he was Chancellor (Conservative) – had already confirmed the reduction the capital gains tax annual exemption to £3,000.
• 2024 - Jeremy Hunt (Conservative) reduced CGT rates on 2^nd property to 24% for higher rate taxpayers in April.
• 2024 - Rachel Reeves (Labour) increased the additional stamp duty surcharge to 5% meaning stamp duty rates on 2^nd property of 5%, 10%, 15% and a staggering 17% for properties over £1.5m.
• 2024 - Rachel Reeves (Labour) confirmed holiday lets will be treated the same as BTLs for taxation.
• 2025 – Rachel Reeves (Labour) Renters Reform Bill will likely pass giving tenants open ended tenacles where landlords can only cancel the tenancy agreement under strict conditions.

Stamp duty levels for additional properties now compared with main residential property are as follows:

In a recent industry report “The Factors Driving the Buy-to-Let Market in Northern England”, it found that back in 2014, 46% of BTLs were in London and the South-East.  This share has now fallen to 32% with the North, Yorkshire and Humberside now growing from a 22% share to 35%.

Comment

Is it any wonder that BTL and holiday let investors are looking north when so many London properties are already over £1.5m whereas property prices are much lower in the North of England, Scotland, Northern Ireland and Wales?  Who would want to tie up hundreds of £000s in investment property in London when you can buy a 2-bed apartment in Stoke for under £50,000 or Grimsby for under £30,000?

Certainly, whilst the directors this firm live in London and have a 2^nd home (and offices) in North Cornwall , their strategy for many years has been to invest in property outside London and to then be able to afford to deliver good quality, energy efficient homes for local workers across North Cornwall.