If you are planning on purchasing a buy to let property or a second home in 2016 the costs of your acquisition will increase significantly because of Stamp duty changes coming into force on 1 April 2016.
In the 2015 Autumn Statement and Spending Review Chancellor George Osborne announced significant increases in Stamp Duty Land Tax rates that will affect buy-to-let investors and second home owners.
The changes, due to come into force on 1 April 2016, will mean a rise in the rate of stamp duty second home owners and buy to let landlords will have to pay on houses purchased after that date. Ownership of properties outside the UK will also be taken into account.
If a company acquires a residential property the higher rates will automatically apply to ALL such purchases after 1 April 2016 – there is no exemption for the first residential property a company acquires.
What this means for you?
If you are looking to purchase a buy to let property or second home after 1 April 2016 you will have to pay stamp duty land tax at 3% above the usual rates.
This will mean that for house purchases over £40,000 and up to £125,000 you will have to pay stamp duty land tax at 3% of the purchase price – currently no stamp duty is payable on residential properties in this price bracket.
Stamp duty rates
The amount of stamp duty you need to pay is based on a range and is dependent on the price of the property:
| Buy to let and second homes | Stamp duty range |
| Currently | 0% – 12% |
| From 1 April 2016 | 3% – 15% |
The effect on a residential buy to let or second house purchase will look like this:
| House purchase price | Stamp duty now | Stamp duty from 1 April 2016 |
| £300,000 | £5,000 | £14,000 |
| £700,000 | £25,000 | £46,000 |
Full details of the new stamp duty liability and any exemptions or reliefs are yet to be confirmed. One important point to note is that the higher rates will also apply to anyone who owns a property beneficially for example under a trust and is acquiring a further property.
The higher rates do not apply to a main residence, although if you buy a new main residence before your current home is sold you may have to pay, and later reclaim, stamp duty at the higher rate.
If you’re currently planning buying a second home or buy to let property, make sure you do so before the 1 April 2016 to avoid incurring the additional stamp duty costs.
For more information, or if you’d like help buying a second home or buy to let property, please contact Zoe Romain or any member of our property team on 0115 9 100 200, or click here to send an email.
Posted on January 20, 2016