The landlord levy raised £1.64 billion in the tax year ending March 31, 2017, which is one billion pounds more than the Treasury estimated when the controversial tax was announced in 2015.
Landlords opposed the levy, as they argued it would put people off from investing in buy-to-let properties and could lead to tenants facing rent increases, as landlords looked at ways to offload the additional charge. Head of residential research at Savills, Lucian Cook, said that anyone hoping for a cut in the levy could wait a long time, according to a Bloomberg report. He said it was a win-win situation for the government. The levy is a much-needed source of income for the government, which has a budget deficit of £52 billion.
The 3% stamp duty levy was introduced by the government in an attempt to stop people buying additional or second homes. The idea was to free up these properties to make it easier for first-time buyers to get a foot on the property ladder. However, first-time buyers are still being frozen out of the market because of the high price of property, which means a mortgage is out of reach for many workers.
It would appear that some landlords had factored in the 3% hike in stamp duty when they decided to invest. Others are paying cash for buy-to-lets, so that they are not affected by the reduction in mortgage relief, at the same time as paying the 3% levy. These figures suggest that people are still confident that capital growth will continue to be healthy on residential property, making it a sound investment.
Despite the Treasury coffers brimming over with the proceeds of the new stamp duty charge, the fallout of the tax change has been felt in some areas of the country.
Obviously, London’s most expensive properties have been the hardest hit by the new tax. Data compiled by broker Knight Frank LLP shows property values in the best London districts fell 6.4% in the year to March. Also, London properties being bought by landlords fell to about 12% in the 12 months to February, compared to 20% the previous year. Overall, fewer UK landlords are considering expanding their portfolio, with the tapering out of mortgage tax relief and the 3% rate of stamp duty on additional homes being the main reasons given for the lack of investment.
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