A guide for landlords on the 2016 stamp duty changes – time is ticking!
- Victoria Wilson (Marketing & Comms)
- Mar 2, 2016
- 2 min read
Definition of Stamp duty land tax: a proportionate tax that anyone buying a property or land costing more than a set amount must pay.
As most people know by now, from April 1st 2016, anyone who buys any additional property which includes second homes or buy-to-lets will be required to pay an extra 3% of the purchase price in stamp duty. The increase does not apply to land or commercial and semi-commercial units, but only residential purchases in personal or limited company.
Please see the below table to find out how you will be affected by the changes:
Currently, for example, anyone buying a £250,000 second home or buy to let before April pays stamp duty of £2,500. This is based on paying 0% on the first £125,000 of the property value and 2 per cent on the portion between £125,001 and £250,000. But from April, landlords will have to pay 3 per cent for the first £125,000 and 5 per cent instead of 2 per cent on the amount between £125,001 and £250,000, therefore meaning that they will have to pay £10,000 in total.
The changes are clearly going to have an effect on the buy-to-let market, however there are more implications that landlords should be aware of:
If someone owns property globally and are purchasing their first or only property in England, Wales or Northern Ireland, they may have to pay the higher stamp duty rate. This would also apply to a foreign homeowner buying in Britain, a Briton with a holiday home, or someone who owns a Scottish property.
The Treasury has been reported to be strict on the definition of a main residence with regards to the increase in stamp duty charge. Therefore it is not possible to ‘flip’ your home anymore and so, if someone buys a second property, they will always have to pay the higher rate of stamp duty, even if they plan to live in it and rent out the old one, known as a let-to-buy.
Time is running out for landlords who want to complete their purchase of property before stamp duty comes into effect. Due to the high influx in landlords rushing to complete their purchase before the surcharge comes into place, meaning that everyone involved in the process are a lot busier. This could impact on the speed of the transaction.
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