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SDLT on purchase of an additional residential property

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Are you prepared for the changes to Stamp Duty Land Tax?

The government is proposing an increase in the rate of stamp duty land tax (SDLT) for those who complete the purchase of  a second home or additional property after 1 April 2016.  The new charge, expected to be an additional 3% on top of the existing SDLT band, is currently subject to a government consultation which was closed on 1 February 2016. The intention is to make housing more accessible to  owner occupiers.

Who will be affected?

The changes will have a significant effect for any home owner looking to purchase a second or subsequent property; this includes buy-to-let investors, landlords, holiday home purchasers and anyone wishing to own more than one property.  The changes will only affect those buying a property  in addition to their main residence when they do not sell their existing main residence.  The higher rates will apply only to additional properties purchased in England, Wales and Northern Ireland on or after 1 April 2016.

How much will it cost to buy additional property after 1 April 2016?

Table of proposed new additional SDLT rates as of 1 April 2016:

Value of additional property being purchasedTotal SDLT
£0 to £125,0003%.
£125,001 to £250,0005%.
£250,001 to £925,0008%.
£925,001 to £1.5 million13%.
Over £1.5 million15%

The additional 3% rate will be a significant upfront cost. For example, the purchase of a £200,000 second property prior to April 2016 will cost £1,500 in SDLT fees (0% up to £125,000 and 2% between £125,001 and £250,000),  whilst, after April 2016 the SDLT fees for purchase of the same value will increase to £7,500 (3% up to £125,000 and 5% between £125,001 and £250,000).

Spouses and joint owners

As with Capital Gains tax allowances, the government will treat married couples and civil partners as one unit. This means any homes owned by either partner will be considered on the purchase of another property by either party.  An individual buying a property may be liable for the higher rates if his or her spouse or civil partner has an existing residential property.  This will similarly affect joint owners that are to be named on the new property title.

Buying if you own a home abroad 

All property owned globally will be considered when a property is to be purchased in England, Wales or Northern Ireland as an ‘additional property’.  This means that the additional 3% rate will apply to those that purchase their first or only property in England, Wales or Northern Ireland, if they already own a property outside of these areas.

The exemptions

There are however some exemptions to the new charges.  The additional SDLT rates will not apply to homes under £40,000 in value, anyone making significant investments in more than 15 homes, or the acquisitions of caravans, mobile homes and houseboats.

If on the day of completion of the transaction, you own two properties at the same time you will have to pay the extra stamp duty. If you are moving into a new main residence and you sell your previous home within 18 months, you will be able to apply for a refund of the additional SDLT.

What can you do?

Seek professional legal and financial advice if you are considering investing in the property market or leaving the property investment market.  With the changes likely to take place on the 1st April and the results from the consultation still pending, make sure that you are aware of rights and exemptions that are available to you in holding your property by contacting the professionals at  SWLaw on 01752 205 202.