The government’s recent Budget contained much of interest for property investors. It was a largely positive event that confirmed many costs which come with investing in UK property would either stay the same or fall:
- Capital Gains Tax on residential property was kept at the same level as before
- There were no rent caps announced
- The Inheritance Tax thresholds were kept the same
- The inflation target was kept the same, positively impacting borrowing costs
- Economic growth targets were positive
- Housebuilding targets were insufficient to meet demand
However, one area where costs will increase for both owner-occupiers and investors is Stamp Duty Land Tax (SDLT).
How did Stamp Duty change in the Budget?
If you want to buy UK property, you have to consider Stamp Duty. This is a tax levied on the purchase of a property, and the amount is determined by the value of the property.
Anyone buying a second property will now have to pay a slightly higher rate than before. The higher rates from 31st October 2024 to 31st March 2025 are:
- Up to £250,000 – 5%
- The next £675,000 (the portion from £250,001 to £925,000) – 10%
- The next £575,000 (the portion from £925,001 to £1.5 million) – 15%
- The remaining amount (the portion above £1.5 million) – 17%
The higher rates from 1st April 2025 onwards:
- Up to £125,000 – 5%
- The next £125,000 (the portion from £125,001 to £250,000) – 7%
- The next £675,000 (the portion from £250,001 to £925,000) – 10%
- The next £575,000 (the portion from £925,001 to £1.5 million) – 15%
- The remaining amount (the portion above £1.5 million) – 17%
That means the cost of investing in UK property has increased. Is UK buy to let property for sale still the ultimate investment opportunity
Can UK Property Still Deliver Strong Returns Despite Higher Stamp Duty Rates?
While Stamp Duty is now higher than it was, it has to be viewed in context of the anticipated house price growth that owners will benefit from in the next property cycle.
The latest Savills residential property forecast shows that we can expect average house price growth of 23.4% in the UK by the end of 2029.
In some regions, that will be even higher:
For investors, you also need to consider the income from monthly rent payments. These are further returns on top of capital appreciation and are at an all time high right now.
Even better, they are also forecasted to rise in the future, with Savills predicting 17.6% rental growth by the end of 2029.
New data released by the Royal Institution of Chartered Surveyors suggests why this is likely to be an accurate forecast in its October 2024 UK Residential Market Survey:
- Renter enquiries have increased 19% in the last three months
- Landlord instructions have fallen 29% in the last three months
- 33% of all respondents expect rents to go up in the next period due to this imbalance
Put another way, there are not enough rental homes to go around. The number of renters is rising at the same time as the number of available properties is falling.
This growing demand continues to drive average UK rents upward, creating even greater benefits for investors.
Is it possible to minimise Stamp Duty costs when investing in residential property?
Yes, it is possible to minimise Stamp Duty costs when investing in residential property in the UK. The key is to look at the thresholds where the tax kicks in.
If you can find a property which is for sale below the £125,000 mark, you will pay the absolute minimum Stamp Duty possible.
While investors are not able to access the 0% Stamp Duty threshold as they are not classed as first-time buyers, you will only pay the minimum rate of 5%.
That means selecting a property below the Stamp Duty threshold can be a great way to make your money go as far as possible.
For example, City Point in Hull is a premium city centre development which includes properties that only meet the minimum SDLT threshold.
The building is within walking distance of the railway station, main shopping centres, the waterfront, the business districts and everything else that people want to be close to.
It’s also a refurbishment development and so more sustainable than a new build – making it even more attractive to the modern renter.
There are a limited number of apartments available that qualify for the minimised Stamp Duty charge. Enquire today to speak to our team and learn more.
