Will Stamp Duty changes affect my property purchase?

Are you planning on buying a second home? Harrison Drury’s Hannah Craig explains how the introduction of stamp duty on additional properties might impact your purchase.

From the April 1 2016, a new higher rate of Stamp Duty Land Tax will be come into effect which will apply to homeowners acquiring an additional residential property.

To be clear, a ‘homeowner’ will include an individual, company, trust, or partnership and the new rate will apply to second homes and buy-to-let properties.

The government has been consulting on the changes in recent months and the first draft of the legislation is expected in March 2016. Matters which are yet to be decided include whether or not there will be a criteria for exemption from this rate and also examples of when the additional rate will or will not apply.

The way it is proposed that the new higher rate will work is to look at the total price being paid on the additional property. If the price exceeds £40,000, the entire purchase price will be subject to SDLT at the following rates:

• 3%: £0 – £125,000.
• 5%: over £125,000 – £250,000.
• 8%: over £250,000 – £925,000.
• 13%: over £925,000 – £1.5 million.
• 15%: over £1.5 million.

Please note the above figures will only be applicable for homeowners with more than one property.

The SDLT rates will continue to work as they do now so the figure is broken up using the figures mentioned above i.e. the first £125,000 will be charged at 3%, the second £125,000 at 5% and will continue to be calculated in lump sums in accordance with the steps above.

There are, however, a couple of circumstances to note in all of this:

1. If you have exchanged contracts on a property, the new higher rates will not apply provided contracts were exchanged prior to 26 November 2015; and

2. If you were to purchase a second property as your main residence then provided you sell your existing home within 18 months of the purchase, you are entitled to claim a refund of the SDLT you have paid.

The above is just a summary of the impending changes and more information should be available in March 2016.

For more information on the impending Stamp Duty changes for additional properties, please contact Hannah Craig on 01772 258321.