Important changes to Stamp duty tax
Posted on 17th February 2016
Buy-to-let landlords and anyone looking to purchase a second home are set to be hit with new costs from April when a controversial extra 3 per cent stamp duty charge is introduced.
The change, which aims to free up housing for buyers, will add thousands to buy-to-let property transactions.
Here we outline the major changes to look out for.
The buy-to-let sector has long-been a controversial part of the property market, with critics blaming landlords for pushing up property prices and keeping first-time buyers locked out.
Chancellor George Osborne has turned his attention to landlords in recent budgets and spending reviews.
First he announced reductions in mortgage interest relief from 2017, but before that landlords are set to be hit with an extra 3 per cent charge on each stamp duty rate band, which vary by property value.
For example, anyone buying a £200,000 second home or buy to let before April pays stamp duty of £1,500.
This is based on paying zero per cent 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 £250,00.
This gives them a total bill of £7,500.
So a landlord would end up paying five times more than a private purchaser in this example.
It is not just landlords that will be hit but anyone owning a second home.
This could be parents buying a property for their children or a couple purchasing a home together where one is already a homeowner.
The Treasury snuck out a consultation December 28 that outlined the changes. The policy will be outlined at the 2016 Budget on March 16.
Who will be affected?
Anyone owning a second property that isn't their main residence and buying another, or replacing the one they don't live in, is likely to get caught up in the changes.
This means if you already own a portfolio of buy-to-let properties, or have a second home, but plan to buy yourself a new home to live in and sell your old one then you will not have to pay the extra stamp duty.
The higher rates will only apply to additional properties purchased in England, Wales and Northern Ireland on or after April 1 2016.
| Band | Existing residential
SDLT rates |
Proposed additional
rates for landlords |
|---|---|---|
| £0 - £125k | 0% | 3% |
| £125,001 - £250k | 2% | 5% |
| £250,001 - £925k | 5% | 8% |
| £925,001 - £1.5m | 10% | 13% |
| £1.5m + | 12% | 15% |