Stamp Duty Changes
From 1st April 2016, the higher rates of Stamp Duty Land Tax (SDLT) now apply to the purchase of additional residential property. This new change will mean those who are buying a second home or a buy-to-let property, will pay substantially more SDLT overall. The new rates are applicable for purchases of more than £40,000 and will be 3% higher that previous rates. Therefore, the following rates will apply to each “slice” of the property price on buy-to-let properties and second homes:
- £0 to £125,000: 3% (no SDLT is payable on properties priced up to £40,000)
- £125,001 to £250,000: 5%
- £250,001 to £925,000: 8%
- £925,001 to £1.5 million: 13%
- The portion above £1.5 million: 15%
The changes only affect those people who are buying additional property. If you own property abroad and are buying in the UK for the first time, you will also pay the new, higher rates. If you are buying a second home to replace your main residence without selling it first, you can claim a refund if you then go on to sell the existing main residence within three years.
You won’t have to pay SDLT if a property is left to you in a Will or if you are buying a plot of land from a neighbour. If you are going through a divorce you can buy an additional property without having to pay the new surcharge before the divorce is finalised.
SDLT does not apply to the purchase of caravans or mobile homes, houseboats, non-residential properties or mixed use properties, ie a flat with a shop downstairs if it is worth less than £40,000.
Parents who are buying a property for their children to use can choose to set up a trust of which their child is a beneficiary and therefore they won’t have to pay the extra tax.
Whilst many people have used the purchase of additional residential property to help family members onto the property ladder, children at university or to provide extra income and a pension, these changes will have an effect. It is likely however that these extra costs will be passed on in either rent increases to tenants, or buyers will simply consider the extra cost in their calculations when assessing whether the overall benefit still outweighs other forms of investment for them.