The Chancellor of the Exchequer’s announcement that he’s introducing a Stamp Duty holiday is great news for the housing market.
OK, so it’s not the holiday most of us were hoping for this year, but if you’re a limited company landlord or thinking of incorporating your buy to let business it should still give you plenty to look forward to in the coming months.
Forget the bucket and spade, sun tan lotion and beach towel. Instead of thinking about the usual things you take on holiday, those considering adding to their portfolio can instead think about the money they’ll save by not having to pay Stamp Duty on the first £500,000 of property purchases until 31st March 2021.
Here’s how it could benefit you if you’re a limited company landlord looking to add to your portfolio. Imagine you’ve seen a house on the market for £232,000, the average price of a property in the UK1. You’ll still to have to pay the 3% surcharge that’s payable on second property purchases, but instead of paying £9,100 in Stamp Duty, you’ll now only have to pay £6,960 – that’s a saving of £2,140. Think how much you could save if you were looking to buy more than one property. It’s all money which could be used to put down a larger deposit or invest in more properties.
And landlords who’re thinking of incorporating their existing buy to let business could benefit too.
Many of them might have been put off becoming a limited company in the past as the process involves ‘selling’ their properties to the business which would normally incur a Stamp Duty charge. The holiday means they’ll now pay considerably less tax if they do it before the end of next March. If you have a customer with a large portfolio of properties who’s considering incorporating, they could end up saving tens of thousands of pounds.
It’s no secret that more landlords are now running their buy to let business as a limited company, and the Stamp Duty holiday may persuade more people to follow suit. According to the latest research by BVA BDRC2, buying a property within a limited company structure remains the most preferred purchase route, with nearly half of landlords saying they intend to buy their next buy to let property as a limited company. That figure rises to 59% for those landlords with 11 or more properties.
And despite all of the challenges faced by landlords in recent months, 87% of them still generated a profit in Q2 – the highest level of profitability since the end of 20183. The average yield has also increased to 5.8% – its highest point for more than a year –with landlords with between 11 and 19 properties generating the highest average yield, at 6.5%.
So where do you turn to help your limited company customers make the most of the Stamp Duty holiday? This is where Precise Mortgages could help. We‘ve designed a range of products and criteria specifically for limited company landlords, and treat every customer as an individual, taking their unique circumstances into account and judging each case on its own merits.
With more than a decade of experience of helping brokers develop their customers’ buy to let businesses, just as we were here for you yesterday, we’re here for you today and we’ll be here for you tomorrow to provide support for your customers.
2 BVA BDRC Landlords Panel Report Q2 2020 (slide 79)
3 BVA BDRC Landlords Panel Report Q3 2020 (slide 33)