From 1st April 2016, anyone purchasing a second property will be liable to pay an extra 3% stamp duty.
To avoid this increase, anyone currently looking to buy a second home must complete the purchase before midnight on 31st March 2016.
As an example, if you are buying a second home, or a buy to let property for £200,000, you will currently pay £1,500 stamp duty. However, from 1st April, this cost will rise to £7,500. This is based on 3% tax on the first £125,000 of the purchase price, and 5% of the remaining amount.
Part of government plans to avoid ‘flipping’, this increase applies not only to buy-to-let landlords but anyone purchasing a second property. Even if they plan to make the second property their primary residential home and rent out their old home. The increase will also apply if you already own property overseas.
What’s more, if you buy a second property from 1st April, you will have to pay the higher rate of stamp duty even if you’re planning to sell your current home. However, if you go on to sell this property within 18 months, you will be eligible for a refund of the stamp duty paid.
The following flowchart is taken from the government’s consultation document and will help you to work out if you will be liable for the higher rate of stamp duty:
Under the new system, even if you’re looking to buy your first home with your partner, but one of you already owns a property, the additional stamp duty will apply. The only way to get round this would be to put your new home in the sole name of the person who doesn’t already own a property. This would, of course, be subject to meeting the affordability criteria with any proposed mortgage lender.
The government has introduced these changes in a bid to reduce the adverse effects of the buy-to-let landlord on the property market, and help first-time buyers currently struggling to get on the property ladder. However, it can be argued that prices of investment-friendly properties will be falsely inflated over the next few weeks because of the rush to meet the 31st March deadline. Likewise, buy to let landlords may have to hike up rental costs to cover the additional stamp duty, inflating rents in the private rental market.
The full policy will be set out in the budget on 16th March 2016. However, there is no indication that these plans will change.
If you’re looking to complete the purchase of a second property on or before the 31st March 2016, the conveyancing team at Linder Myers can help.
Our team understands the importance of speed where investments are concerned, and the impact that the new stamp duty rates will have on our clients’ personal finances.
Our team is highly experienced and knowledgeable, and our conveyancers pride themselves on providing a solution focused and personable approach.
We can provide a competitive no obligation quotation, so please get in touch with the team on 01743 218 450 and speak to a member of the conveyancing team today.Contact us