It’s true; as April 1st 2016 begins, so does a new 3% stamp duty surcharge on second homes.
What does it mean, and how might it affect you?
Where did this price-hike come from?
The Chancellor announced the change to ‘SDLT’ (Stamp Duty Land Tax) in his budget just two weeks ago (though it had been promulgated last Autumn); it has brought on a great rush to complete purchases of second homes and buy-to-let properties, and has affected single-property buyers caught in chains. Although the change began at midnight Thursday 31st March, in effect it commenced when the banks closed earlier in the day. As business commences on Friday April 1st the new 3% surcharge applies across the multiple-property board – with very few exceptions.
What is the change?
The 3% Stamp Duty Surcharge is a loading placed on top of existing Stamp Duty rates. The banding at various values remains as before – just add the 3%.
So whereas a property in the £0-125k range was previously zero duty, it now attracts the 3% charge – and so on up to the £1.5m+ bracket, now at 15%.
The charge is 3% of the total price of the property, plus the tiered existing duty.
For example –
On a £200,000 property
As a sole property/home the charge is zero for the first £125k and then 2% of the remaining £75k – a total of £1500.
As a second home or buy to let property, there is 3% on the first £125,000 (£3750) and then 5% (2% plus additional 3%) of the remaining £75k (£3750) – which totals a not inconsiderable £7500.
Does it apply to everyone?
Your main home is in the UK
You already own that one property (or more properties)
In England, Wales, Northern Ireland and Scotland – and in fact anywhere else worldwide
Then yes, it applies to you.
Buying for your child?
It still applies – you have a main residence already.
At least you can still ‘gift’ them a deposit!
If I buy a new home but can’t yet sell my old one?
You still have to pay – but you can reclaim if completed within 36 months.
Decide to keep your old home and let it out?
The tax applies.
This is likely to affect many couples who settle together in one home and put the other out to rent.
Already own buy-to-let and want to move main residence?
The extra tax does not apply if you are changing your main residence.
BUT a rented property does NOT count and it appears that the tax would apply if you go from renting a main residence to buying one – if you also own other property already.
Couple buying a property with only one as an existing property owner?
Tax still applies.
Divorcing and marital home not sold with your name still on the deeds?
You still have a property so you will be buying a second one – tax applies.
BUT if living apart with divorce the eventual outcome – you will be treated as separate individuals and will not have to pay.
Setting up a Company to avoid the tax?
No, it still applies.
Major property investor?
It gets you too!
And if I ‘forget’ to inform your solicitor when purchasing…?
Solicitors have been told to ask a direct question about property ownership; if you lie, you risk a Fraud charge.
Are there ANY exemptions?
Buy for under £40k
Buy a Caravan
Buy a boat
Be a Social Housing Provider or a Charity.