Writing in Property118, Mark Alexander asks why small landlords are being picked on, whilst large landlords escaped the recent tax rises.

His article can be seen here and explains that the recent rise in Stamp Duty Land Tax (SDLT) surcharge to 5% for small landlords has highlighted a stark disparity in how SDLT affects different types of property investors. While small landlords now face a high SDLT burden, corporate investors, by purchasing properties as a single block, can pay significantly less under non-residential SDLT rates. This difference places small landlords at a clear disadvantage and may ultimately push them out of the market.

Comparing SDLT Costs: Small vs. Corporate Landlords

To illustrate the disparity, consider two investors, each spending £2 million. A small landlord buying five separate residential properties would face an SDLT bill of £251,250 due to the residential rate structure and the 5% surcharge. Meanwhile, a corporate investor buying a block of six flats as a single transaction would pay only £89,500 under the non-residential rate—a savings of £161,750.

This gap only grows as investments scale. For example, if 10 small landlords each bought £2 million in properties, their combined SDLT would be £2,512,500. In contrast, a corporate investor purchasing 10 similar blocks in a single transaction would pay £989,500—more than a million less.

Impact on Tenants and the Market

This skewed SDLT structure has implications for tenants, too. As small landlords exit the market, tenants lose access to more personalized and potentially affordable rental options. Large corporate landlords, often motivated by profit, tend to charge higher rents and offer less flexible terms. Without small landlords in the market, rental options shrink, leading to higher costs and less choice for tenants.

Policy Reform Needed for Fair Competition

To ensure a fair and competitive rental market, the government might consider the following reforms:

1. Reducing SDLT rates for small landlords to level the playing field with corporate investors.
2. Reassessing the 5% surcharge for small-scale landlords to prevent further market imbalance.
3. Offering similar SDLT relief for small landlords that corporate buyers currently enjoy.

Supporting Fairer Tax Policies

Organizations like Property118 are advocating for these changes, emphasizing the need to protect small landlords. With a fairer tax system, both landlords and tenants can benefit from a healthier, more competitive rental market. Supporting these advocacy efforts can make a difference in shaping policies that foster affordability, diversity, and flexibility in housing options.