Claiming back Stamp Duty could pull Landlords back from cliff edge

Stamp Duty refunds to help landlords?

As the UK's housing market prepares for a critical year, buy-to-let investors face a cliff's edge. Over a third of buy-to-let fixed-rate mortgages are set to end in the next two years, leaving landlords susceptible to interest rates higher than those seen since 2008. Moreover, nearly one in six buy-to-let loans are floating deals, meaning payments are already rising as the Bank of England raises rates.

According to Savills Plc, landlords are more exposed to rising mortgage rates than other borrowers. This is because many have interest-only loans that reflect rate changes rapidly. The average buy-to-let mortgage rate, which reached 6.9% in October, could be fixed for two years at 6.27% on January 4th.

Buy-to-let loans are not stabilising as quickly as standard deals, and over the last few months, there has been a significant decrease in the number of buy-to-let mortgage deals and an increase in the number of landlords selling or raising rents. BOE Deputy Governor Jon Cunliffe predicted that some of the UK's 2 million buy-to-let owners would be forced to sell and take capital profits, given that most are on interest-only deals. This means that many landlords are looking for any help that they can get and are turning to Stamp Duty claims and rebates.

Rent v cost of living crisis

The cost of a new rental agreement rose by 12.1% in the year to October, surpassing the average annual wage growth of 6%. However, rents are expected to increase at a slower pace this year due to the cost-of-living crisis, leading landlords to the risk of losing money on their rental properties.

In April, Chancellor Jeremy Hunt's decision to cut capital gains tax allowances will impact buy-to-let landlords. The exemptions will be reduced to £6,000, and then again to £3,000 from April 2024, meaning owners looking to sell will have to pay stamp duty on properties that sell for more than the amount they paid.

Due to decreased demand, landlords may find it challenging to sell their properties, and the buy-to-let space is becoming a less appealing investment for individual landlords. Nevertheless, landlords with several properties may find comfort in their fixed-term loans expiring gradually, and those with properties registered under a limited company may deduct interest costs before paying corporation tax. Investors with five or six properties may be shielded from higher rates by a staggered refinancing.

Several landlords are turning to companies such a Stamp Duty Rebates to double check the tax that has been paid in the last 4 years. This can be quickly checked and if an overpayment had been made then this can often be resolved in around 6 weeks. Typical rebates to qualifying properties are 3% of the purchase price which can amount to several thousand pounds, giving landlords the urgent cashflow that many need in these difficult times.