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By Adrian Gill

Non-Executive Board Member, Reapit


Could an adjustment to BTL Stamp Duty improve the lettings market?

The Stamp Duty holiday has been very beneficial for hundreds of thousands of buyers looking to take advantage of savings, even as the final scramble looks set to ignite the market further in the remaining weeks before the holiday ends on 30 June. However, the holiday does not apply for landlords, and they could certainly use a break.

Whilst private landlords are generally out of favour with the government, it is important to recognise that in Britain their properties provide a vital supply to tenants. Strangling But-to-Let (BTL) supply could see rent increases exceed house price inflation, thus driving millions of tenants into poverty. We therefore think it important to promote the cause of BTL landlords.

Landlords have already had to pay higher surcharges on second homes for some time now, and they have seen little reprieve from the Stamp Duty Land Tax (SDLT), which since 2016 has increased by an extra three percentage points on each band on top of the standard rate when a landlord purchases a BTL property. As such, the market for BTL is perhaps no longer as financially attractive as it once was.


There has been a growing conversation on abolishing Stamp Duty altogether, a decision which could have a positive impact on residential buyers trying to get on the market or upsize, but could there also be a net positive if BTL landlords also were exempt from the SDLT, or at least faced reduced rates of tax on the purchase of additional properties?

It has been five years since the previous government introduced the 3% Stamp Duty surcharge on additional homes with 1 April 2021 marking that anniversary, and coupled with the tapering of mortgage interest tax relief on BTLs, the net result has been that landlords have cut back on property purchases over the period, with Hamptons estimating that as many as 250,000 fewer BTL properties were purchased over this period as a direct result of these tax changes.  

Alongside the reduction in properties purchased by BTL landlords there has also been an increase in landlords reducing their portfolios or selling up entirely – Hamptons estimated that there were 2.66 million landlords in Great Britain in 2019, some 222,570 fewer than the peak in 2017.

One of the consequences of this is a reduction in available stock available to rent, with Hamptons also estimating in their aforementioned research that the volume of privately rented households was 0.9% smaller than it would have been without the tax changes.

Given that the 3% increase on BTL purchases resulted in a sell-off of landlord portfolios, would the logic be on track to suggest that the opposite is also true? Reducing the rate of SDLT that landlords pay on their second homes could encourage existing landlords to expand their portfolios, or indeed influences non-landlords to join the game if the prospect is lucrative enough.

According to the 2018 English Private Landlord Survey conducted by the Ministry of Housing, 45% of landlords have just one rental property. If the costs associated with purchasing a second home were reduced, then this might just encourage more homeowners to take the plunge and invest in a BTL property. This would bring increase the volume of properties available to rent in the market and therefore might help to ease pressure on the high demand in the sector, which in turn could help soften rents and enable a more affordable market for tenants.

In fact, looking at the current state of the market, whilst landlord numbers have reduced, the remaining landlords have indicated that they are planning to buy more properties, with the latest Landlord Confidence Index from the NRLA suggesting that 21% of landlords intend to increase their portfolios over the next 12 months. Would that percentage be higher if the SDLT on additional homes was reduced? Or indeed, removed entirely?

I believe most in the industry agree that Stamp Duty needs an overhaul. Just this month the Bank of England Chief Economist Andy Haldane warned that the property market is “on fire” as a result of the imbalance of demand and available supply, citing the 10.2% increase in house prices over the year to March 2021 included in the latest ONS House Price Index for March. The Stamp Duty holiday is in part to blame for this, but it also reflects the government’s haphazard approach to regulating the industry without thought on its possible impacts.

Much is often said that the health of the economy is tied up in the property market, but continually increasing house prices and rents cannot be seen as healthy in the long run. Reducing SDLT across the board might also help to stabilise both, though this should be coupled with a more ambitious and achievable construction process to bring more stock into the market – the growth of the Build to Rent sector (which Savills estimated received a record £1.2 billion in investment during Q1 2021) shows that renting is becoming more dominant across the property market, and for that to succeed, the government needs to stop viewing landlords simply as a highly taxable form of income.

Housing is an essential living requirement and keeping the market healthy, affordable, and accessible should be the main priority of the government’s regulatory approach. Yes, the Treasury needs to find ways to refill its coffers, but it also needs to take a balanced approach to taxation in a manner that will not adversely affect the property market.

We need only look at the substantial and prolonged increases to house prices and rents in the UK to acknowledge that something needs fixing. The Institute for Fiscal Studies believes that abolishing SDLT would help stimulate the economy after COVID, and if people have more money in their pockets they are more likely to reinvest, raising taxation across other areas of the economy.

Surely then, a comprehensive review of the SDLT across all stakeholders would be a good way to start, for both owner-occupiers and BTL landlords – small changes now could flower big, positive changes down the line. But also, if we continue to discriminate against BTL landlords, the threat of significant rent increases could adversely affect the most vulnerable in our society.

*Adrian Gill is the Non-Executive Board Member at Reapit

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    This is not up for debate. The Government has decimated supply with the introduction of the punitive 3% levy. My company has around 8 properties to let where this time of year we would have closer to 30 and the rents in our area have gone up 20% in a year. The supply demand imbalance is untenable and so unfair to would be tenants as they scramble for acceptance. This on top of the mortgage interest ‘amendment’ and tenant fee ban it’s fair to say there’s a lot of landlord bashing going on. It’s about time our government realised that there are thousands and thousands of landlords out there providing an excellent service to their tenants whilst seeing their income dwindle. Something needs to be done as a matter of urgency.


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