Corporate Landlords Pay Less Stamp Duty: A Rigged System

The UK property market is often seen as a playground for wealthy investors, but the extent to which the system is rigged in their favour is truly shocking. Small landlords, often family-run businesses or individual investors, are being taxed out of the market, while corporate landlords enjoy significant advantages—none more so than when it comes to Stamp Duty Land Tax (SDLT).

One of the clearest examples of this inequality is how corporate landlords can benefit from non-residential SDLT rates when purchasing six or more properties in a single transaction. Meanwhile, smaller landlords who don’t meet that threshold are stuck paying the full residential SDLT rates, including the punitive 3% surcharge for additional properties.

A Real-World Example of Inequality

Let’s look at two examples to see how the system is weighted in favour of corporate investors:

• Private Landlord: A small landlord purchases five properties, each worth £400,000, for a total of £2,000,000.
• Corporate Landlord: A corporate landlord purchases six flats in a block for £2,000,000.

Despite both landlords spending the same amount, the amount of SDLT each pays is drastically different. Here’s how the calculations break down:

SDLT for the Private Landlord

The private landlord is buying five properties for a total of £2,000,000, but since these properties are considered additional residential purchases (second homes or buy-to-let properties), the 3% SDLT surcharge applies on top of the standard residential rates. Here’s how it works:

1. £0 to £250,000 at 0%:
   • £250,000 x 0% = £0.
2. £250,001 to £925,000 at 5%:
   • (£925,000 – £250,000) = £675,000 x 5% = £33,750.
3. £925,001 to £1,500,000 at 10%:
   • (£1,500,000 – £925,000) = £575,000 x 10% = £57,500.
4. Above £1,500,000 at 12%:
   • (£2,000,000 – £1,500,000) = £500,000 x 12% = £60,000.

Next, the 3% surcharge is applied across the total purchase price:

• £2,000,000 x 3% = £60,000.

Total SDLT for the Private Landlord:

• £0 + £33,750 + £57,500 + £60,000 + £60,000 = £211,250.

The private landlord ends up paying £211,250 in total SDLT—an eye-watering sum for someone investing in just five properties.

SDLT for the Corporate Landlord

The corporate landlord, on the other hand, is able to benefit from non-residential SDLT rates, simply because they’re purchasing six properties in one transaction. Here’s how their SDLT is calculated:

1. £0 to £150,000 at 0%:
   • £150,000 x 0% = £0.
2. £150,001 to £250,000 at 2%:
   • £100,000 x 2% = £2,000.
3. Above £250,000 at 5%:
   • (£2,000,000 – £250,000) = £1,750,000 x 5% = £87,500.

Total SDLT for the Corporate Landlord:

• £0 + £2,000 + £87,500 = £89,500.

The corporate landlord pays £89,500 in SDLT, saving a massive £121,750 compared to the private landlord.

The Disparity in Black and White

Despite spending the exact same amount, the corporate landlord saves a staggering £121,750 in SDLT, simply because they qualify for non-residential rates. This is money that could be used for further investment, property upgrades, or even just as profit, while small landlords are left footing a much larger bill.

A Bigger Disparity: When Corporate Landlords Buy Multiple Blocks of Flats

The disparity doesn’t end with one transaction. Corporate landlords have the financial resources to purchase multiple blocks of flats, further maximising their tax savings.

Imagine a scenario where a well-funded corporate landlord purchases 10 blocks of flats, each worth £2,000,000, for a total investment of £20,000,000. Meanwhile, 10 individual private landlords, each buying properties worth £2,000,000, would each face the same high SDLT rates we calculated earlier.

Here’s how much each would pay:

SDLT for 10 Private Landlords (Each Buying Properties Worth £2,000,000)

For each private landlord purchasing properties worth £2,000,000, the SDLT payable is £211,250 (as calculated earlier).

For 10 private landlords, the total SDLT paid would be:

• £211,250 x 10 = £2,112,500.

SDLT for the Corporate Landlord (Buying 10 Blocks of Flats Worth £20,000,000)

The corporate landlord, buying 10 blocks of flats in one transaction for £20,000,000, benefits from the non-residential SDLT rates. Here’s how that calculation works:

1. £0 to £150,000 at 0%:
   • £150,000 x 0% = £0.
2. £150,001 to £250,000 at 2%:
   • £100,000 x 2% = £2,000.
3. Above £250,000 at 5%:
   • (£20,000,000 – £250,000) = £19,750,000 x 5% = £987,500.

Total SDLT for the Corporate Landlord:

• £0 + £2,000 + £987,500 = £989,500.

Final Comparison Table:

The Disparity Magnified

In this scenario, the 10 private landlords end up paying a staggering £2,112,500 in SDLT, while the corporate landlord pays just £989,500. That’s a difference of £1,123,000—even though both parties are investing the same £20,000,000.

This example clearly shows how the SDLT system is stacked against small landlords. The corporate landlord pays significantly less tax on the same value of property simply because they can purchase more in one go and benefit from non-residential SDLT rates.

The Bigger Picture: Why This Matters for Tenants

It’s not just landlords who are affected by these unfair tax policies—tenants are also bearing the brunt. Small landlords often offer more flexible, long-term rental options and are more likely to take care of their properties because they have a personal stake in them. But as small landlords are driven out of the market, corporate landlords are stepping in to fill the gap.

Corporate landlords, motivated by profit, often raise rents faster and may offer less personal service. As these larger players consolidate their control over the rental market, tenants will have fewer choices, higher rents, and more rigid tenancy agreements.

Time for Reform

The SDLT system is clearly skewed in favour of corporate landlords. For small landlords to continue providing much-needed housing, the government must address the inequality in the tax system. Reducing the SDLT burden on small landlords, or at the very least, reconsidering the 3% surcharge for those who own only a few properties, would be a step in the right direction.

Without these changes, we’ll continue to see more small landlords selling up, leaving the rental market dominated by corporate giants who care more about profits than people. This means fewer affordable homes for tenants, higher rents, and an increasingly monopolised rental market that reduces competition and erodes tenant protections.

To Summarise

While large corporate landlords benefit from non-residential SDLT rates, small landlords are being taxed out of the market with significantly higher SDLT bills. As our example illustrates, 10 small landlords investing £20 million collectively would pay over £1 million more in SDLT compared to a single corporate landlord investing the same amount.

This disparity is driving small landlords out of the rental market and further empowering corporate landlords, ultimately hurting tenants with higher rents and fewer choices. With your support, we can fight for tax reforms that level the playing field and protect both landlords and tenants from the consequences of a rigged system.

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