Amidst the anticipation leading up to last week’s Autumn Statement, landlords were largely concerned about a potential hike in Capital Gains Tax (CGT), an issue that had many re-evaluating their investment strategies. Surprisingly, however, the increase in Stamp Duty Land Tax (SDLT) on second homes seemed to raise fewer alarms among property investors, as shown in a recent survey by Benham and Reeves.

According to the survey, nearly one in five landlords (19%) in England opted to delay their buy-to-let investment decisions before the Autumn Statement, with fears of a CGT increase driving this cautious approach. A significant portion of these investors, 22%, revealed that if the government had raised CGT on residential property, they would have actively downsized their portfolios. Within that group, 10% said they would have gone as far as leaving the sector entirely.

Yet, despite these anxieties, a large majority of landlords – 84% – indicated that they plan to remain in the buy-to-let market without altering their portfolios in the coming year. Furthermore, an additional 4% intend to grow their portfolios, while a modest 12% foresee a reduction.

In the end, the much-dreaded CGT hike did not materialize, bringing relief to many. However, landlords are now facing an immediate increase of 2% in SDLT on second home purchases, adding some cost to future acquisitions.

For those investors who are considering expanding their portfolios, the SDLT hike is not an overwhelming deterrent. About 47% of landlords who plan to grow their holdings said they would adjust their expansion plans due to the higher SDLT rate, but a resilient 53% remain undeterred, intending to proceed as originally planned.

Among the majority who are sticking with their current portfolio size, only 11% had initially considered expansion but have now scaled back due to the new SDLT implications.

Marc von Grundherr, director of Benham and Reeves, commented on the situation: “It’s clear that whispers of a Capital Gains Tax hike in last week’s Autumn Statement were a considerable concern for around one in five landlords and, had they come to fruition, we could have seen a worsening of the current rental crisis as more landlords chose to call time on their buy-to-let investment.”

He elaborated, noting that the absence of a CGT hike has been positively received: “The fact it didn’t materialise has been well received, not just by domestic landlords, but also foreign investors, who are more than happy to pay as it only applies to the net profit they generate. When you also consider that this rate has actually been reduced from the previous rate of 28%, many actually view themselves as better off in the current market.”

Von Grundherr added that the SDLT increase, while not ideal, is something landlords feel they can manage: “However, it’s clear that whilst they didn’t escape completely unscathed, a 2% hike in second home Stamp Duty costs is a slightly bitter but manageable pill to swallow. The buy-to-let sector remains one of the safest and most consistent avenues of investment despite the Government’s best efforts and the vast majority of landlords continue to recognise this. The additional upfront cost now required by way of stamp duty is one that can be mitigated within a very short time period and so we don’t believe it will have much of a detrimental impact on the rental sector.”

In summary, while the buy-to-let sector has narrowly escaped a more disruptive tax burden, the minor increase in SDLT appears to be a tolerable change for most landlords. With resilience and cautious optimism, many plan to stay the course, cementing the buy-to-let market’s status as a dependable investment choice.