The recent changes to Stamp Duty Land Tax (SDLT) outlined in the UK Budget have caused a stir among landlords, particularly those with buy-to-let portfolios, as they prepare for the higher tax liability that will take effect in April 2025. The move is expected to significantly impact property transactions, leading to increased costs for landlords looking to sell. Here’s a breakdown of what these changes mean for landlords and why many are looking to sell sooner rather than later.

The SDLT Changes: A Quick Overview

Currently, the SDLT threshold is set at £250,000 for all buyers, with a higher threshold of £425,000 for first-time buyers. However, from April 1, 2025, these thresholds will drop significantly:

• Standard residential purchases will return to the previous threshold of £125,000.
• First-time buyers will face a threshold of £300,000 — down from the current £425,000.

For landlords, the most pressing issue is the impact of these changes on additional properties. Currently, the SDLT rates for second homes and buy-to-let properties are 3% higher than standard rates. Under the new rules, this surcharge will continue to apply, but with the reduced threshold, landlords will find themselves facing higher SDLT rates on sales of investment properties.

Why Selling Before April 2025 Makes Sense

For many landlords, the 2025 SDLT changes create a strong incentive to act sooner rather than later:

1. Increased SDLT Rates: From April 2025, the lower thresholds for SDLT mean that selling a buy-to-let property will trigger higher tax bills. For landlords with multiple properties, the cumulative impact of the higher rates could make selling much more expensive than it would be under the current system.
2. Potential for Lower Sale Prices: Higher SDLT costs can put downward pressure on sale prices, as potential buyers factor the additional tax burden into their offer prices. This could result in landlords receiving less than expected for their properties, especially if the higher SDLT rates cause a reduction in demand from investors who may be put off by the increased tax liability.
3. Challenges with Tenant Evictions: Recent changes to tenant eviction laws, particularly under the Renters’ Rights Bill, make it more difficult for landlords to regain possession of a property before selling. With longer timescales for eviction, landlords may be unable to complete a sale before April 2025, especially if they have tenants who need to be vacated before the property can be sold.
4. Landlord-to-Landlord Sales: One solution for landlords looking to avoid the higher SDLT surcharge is a landlord-to-landlord sale, where the buyer takes on the property with the existing tenancy. This arrangement allows the new owner to inherit the current tenancy agreement, which can be an attractive proposition for investors. However, this option requires careful management and negotiation, particularly if the tenant is in a long-term agreement.
5. Act Now, Save Later: Given that the changes to SDLT are set to take effect in 2025, landlords have a limited window to sell properties and benefit from the current, more favorable tax thresholds. The urgency is heightened as completion times for property transactions can take several months, meaning that any sale needs to be completed before the April 2025 deadline to avoid the higher SDLT rates.

The Current Market: Why Timing is Crucial

Despite the challenges presented by new SDLT rules, the current property market may still offer a more favorable environment for landlords looking to sell. Several factors are making it easier for sellers today:

• Stable Demand for Buy-to-Let Properties: The continued demand for rental properties, driven by ongoing housing shortages and a high number of renters, means that many buy-to-let properties remain desirable to investors.
• Less Market Uncertainty: Compared to the potential market slowdown in 2025, property prices may still be stronger now, giving landlords the opportunity to sell at relatively high prices, especially if they act quickly.
• Existing Buyer Pool: With many landlords looking to sell in advance of the 2025 SDLT changes, there may be an influx of buyers looking for well-maintained, tenanted properties that are ready for immediate income. This presents a unique opportunity for landlords to sell directly to other landlords or investors.

What Landlords Should Do Now

1. Get Professional Advice: Landlords should seek professional advice from property agents and tax specialists to fully understand how the SDLT changes will affect their specific portfolio. This advice will also help to identify whether a landlord-to-landlord sale is a viable option.
2. Start the Selling Process Early: Given the potential time-consuming nature of property sales, landlords should begin the process now to ensure that they can complete the transaction before the SDLT thresholds change in 2025.
3. Evaluate the Portfolio: Landlords should assess whether they want to sell all or just some of their properties. Depending on their financial situation, they may choose to sell higher-value properties or those with the most pressing maintenance or legal challenges.
4. Explore Alternatives to Selling: In some cases, landlords might consider refinancing their properties or transitioning them into short-term lets if selling is not immediately viable. However, for many, selling before the SDLT changes will remain the most cost-effective option.

Conclusion: Time to Act

For landlords, the upcoming changes to SDLT represent a significant shift in the property market that could lead to higher costs and more difficult sales conditions in 2025. With the prospect of higher tax rates, reduced sale prices, and the challenges of tenant evictions, many landlords are choosing to sell sooner rather than later to take advantage of the current tax thresholds.

Given the potential impact of these changes, landlords should act quickly to ensure that they can navigate these challenges effectively. The time to start the selling process is now, particularly if they want to avoid the heavier tax burden and potential reductions in property values that could come with the SDLT changes in 2025.