Four in 10 landlords are considering moving their property investments into limited company vehicles following the rise in stamp duty, a new survey has revealed.
According to Paragon Mortgages, 41% of landlords are considering moving their portfolio into a limited company following the Chancellor’s decision to limit tax relief and raise stamp duty, while a further 5% have already established limited companies.
For larger landlords with 20 or more properties, 14% are already operating as limited companies, while 63% are considering it.
The survey of 1,400 private rented sector landlords found that in terms of portfolio growth, 43% of agreed that the stamp-duty increase will affect their buy-to-let purchasing plans over the next two years. This figure rises to 63% for larger landlords with 20 or more properties.
The 3% increase on stamp duty is part of the government’s attempt to curb the buy-to-let market and free up property for first-time buyers. The basic rate of tax relief landlords can claim on properties is also set to fall to 20% from April 2017.
Under the changes, the stamp duty on a £250,000 buy-to-let property will rise from £2,500 to £10,000, while the rate for a £400,000 property will more than double from £10,000 to £22,000.
Despite uncertainty about what impact the changes to tax relief and stamp duty might have however, tenant demand amongst landlords is still perceived as being high.
Demand for rented property in the fourth quarter of 2015 was strongest in the South West where 40% of landlords reported demand to be rising. Landlords in the North East experienced the weakest demand, with just under a quarter (24%) of landlords reporting increased demand.
Reflecting this demand, average yields have also remained stable and averaged 5.6% across the country – unchanged on the previous quarter. The North West saw the highest yields at 6.2%, while Outer London had the lowest at 5.1%.
John Heron, director of mortgages at Paragon, said: “Recent government interventions into the buy-to-let market are now beginning to impact landlord sentiment and plans. The fundamental drivers of the market however – tenant demand and yields – remain strong so there are competing dynamics at play.
“It is interesting to see that concern about the impact of changes to stamp-duty and tax relief is greatest among larger landlords. This concern is likely to grow now that the government have confirmed that landlords with larger portfolios will have to pay the increased rate of stamp-duty on buy-to-let purchases.”
Can anyone clarify whether the buy to let duty will apply where a house is purchased to be occupied by the purchaser, and the house they have vacated becomes the house to be let out?
Yes the stamp dutywill still apply to the property being purchased as it is a second ownership. Thanks