If you are considering purchasing an additional property which is not going to be your main residence, it is important that you are aware of the new Stamp Duty Land Tax (SDLT) rates which will come into force from 1st April 2016. The Government confirmed the changes to stamp duty land tax 2016 at the Budget on 16th March 2016.
If you purchase a second home or a buy-to-let property on or after 1st April 2016, the Stamp Duty payable will increase by 3% from the current rate (excluding transactions under £40,000 which are not subject to SDLT).
The following table highlights the changes:
|Property price band||Current residential Stamp Duty Land Tax rate||New additional property Stamp Duty Land Tax rate|
|£0 – £40,000||0%||0%|
|£40,001 – £125,000||0%||3%|
|£125,001 – £250,000||2%||5%|
|£250,001 – £925,000||5%||8%|
|£925,001 – £1.5m||10%||13%|
The new rules mean that any purchase of an additional property which is completed on or after 1st April 2016 will be subject to the higher rate of SDLT (unless you are replacing your main residence). If you own multiple properties and choose to sell your main residence and purchase a new main residence, you will not be required to pay the higher rate.
If you purchase a property and upon completion it is the only property you own (i.e. you are a first time buyer or you have sold your previous property), you will not have to pay the higher rate.
If you have already exchanged contracts on a purchase of an additional property and the completion date is on or after 1st April 2016, you will be required to pay the higher rate if contracts were exchanged after 25th November 2015. If contracts were exchanged on or before 25th November 2015, you do not need to pay the higher rate.
If you purchase a buy-to-let property but you do not own any other property (e.g. you reside at a rented property), you will not be required to pay the higher rate.
To ensure fairness, the government has proposed that those who sell their previous main residence within 36 months of the purchase of a new main residence will be entitled to a refund of the additional SDLT paid.
It is important to be aware of these changes when considering purchasing an additional property.
If you would like to receive a quotation or require further information on conveyancing issues then please do not hesitate to call our friendly team on 01785 223440.