Stamp Duty - Act Now or Pay Later?

By Solicitor at 00:00

As announced in the Autumn statement, April 1st 2016 is to bring about some radical changes in the application of Stamp Duty in residential conveyancing transactions.

In an attempt to combat the age old problem of housing stock being purchased by investors and landlords, therefore preventing first time buyers from entering the property market, the changes are set to hit where it hurts...in the pocket!

Although the new rules have not yet been finalised, the Treasury has published a consultation paper which outlines how the extra tax will apply.

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.

The new proposals include increasing the existing rates on Stamp Duty by a further 3% from April 1st 2016 on second homes and other additional residential properties.

The advantages of this additional tax according to George Osborne is that it will raise £1bn by 2021 which will be used to build 400,000 affordable, new homes to buy as well as rent.

Many however believe that this could be the final nail in the coffin for small landlords who could be forced to pass on the additional cost to tenants through their rent payments.

The Treasury has published a guide to enable you to check if a purchase of a property by an individual will be liable for the higher rates of Stamp Duty Land Tax (SDLT).

The proposed higher rates will be 3 percentage points higher than the current residential rates;

Band

Existing residential SDLT rates

New additional property SDLT rates

£0* - £125k

0%

3%

£125k - £250k

2%

5%

£250k - £925k

5%

8%

£925k - £1.5m

10%

13%

£1.5m +

12%

15%

*Transactions under £40,000 do not require a tax return to be filed with HMRC and are not subject to the higher rates.

Exemptions to the new, higher rates include, caravans, houseboats and properties worth less than £40,000.00. Charities and registered social landlords will also escape the hike.

It seems that the key to avoiding this extra expense is to act now!

If you are planning to purchase an additional home and want to take advantage of the current Stamp Duty calculation rules, then you will need to ensure that your purchase is completed by March 31st 2016.

This could be a busy start to the New Year for the property market!

Further information can be found at: https://www.gov.uk/government/consultations/consultation-on-higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties/higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties

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