Peer-to-peer lender LendInvest has examined the financial impact on landlords – and their tenants – of the additional 3% Stamp Duty Land Tax (SDLT) which will be payable investors from 1 April 2016.
It found that landlords in London and the Southeast will need longest to repay higher SDLT rates with investors in inner London and Harrow needing the equivalent of 20 months’ rent or more to repay higher SDLT. The tax hike also means landlords in 13% of country will pay SDLT for first time.
LendInvest found that average house prices in 14 out of 105 postcode areas are less than £125,000, meaning future buy-to-let purchases will be subject to up to £3,750 SDLT for the first time.
Darlington, Halifax and Doncaster are among the worst affected by first-time SDLT payments with 86% of first-time stamp duty payers in the Northeast or Northwest.
Landlords in areas including Sunderland, Blackburn, Durham, Hull and Wigan could have to pay up to £3,750 on new purchases on which they paid £0 previously.
Christian Faes, co-founder and CEO of LendInvest, said: ”The stamp duty hike spells bad news for landlords – and their tenants. Put simply: when taxes rise, someone has to pay. Our latest BTL Index shows that the likely payer is ultimately going to be the tenant, with higher rents. The Stamp Duty Land Tax hike will cause rental yields to fall for landlords, putting pressure on them to raise the rents they charge.
“It’s not just in Inner London, where landlords’ taxes will soar, that we can expect to see landlords and tenants squeezed financially. The index shows that all across England and Wales, we will many landlords factoring several thousands of pounds of stamp duty tax into their budgets for the first time. Towns like Sunderland, Blackburn, Wigan and Oldham could be particularly badly impacted: here, rental yields are comparatively good but average house prices are below £125,000 meaning SDLT will be imposed for the first time.
“The Treasury’s decision to inflict this tax hike is part of their longer term plan to professionalise the buy-to-let market and make Britain a country of homeowners. While the mission has its merits, there are no quick fixes to the nationwide housing crisis. Until there are more houses on the streets that people can buy at reasonable prices, landlords have their place and their tenants must be protected.”