Stamp duty changes explained….

From the 1st April 2016 there’s going to be controversial changes for any buy to let landlord in England, Wales and Northern Ireland. The changes were outlined and consulted on back in 2015 however they were confirmed as part of the Government’s budget announcement last week and will soon come into effect. People buying additional property will be required to pay an extra 3% stamp duty and this is payable by companies and individuals alike, regardless of the number of properties being purchased.

The budget also announced that there would be mortgage interest relief reductions imposed from 2017 but the stamp duty changes will happen much earlier and the new rates will vary depending on the property value.

It had been thought that setting up as a limited company might be a way to bypass the changes. However, the chancellor scrapped plans to exempt companies with a stock of 15 or more properties. Essentially any individual or company buying additional property from 1st April will be hit by the new charges.

Of course it is not just buy to let landlords and companies that are feeling the impact of the changes. Anyone buying a second home will be required to pay extra, this could be a holiday home, a home for a child to get them on the property ladder or simply a second residence. In the majority of circumstances the extra stamp duty will need to be paid and even if someone owns a property abroad and is buying one in the UK as well they will still be liable for the new charges. To avoid the charges a person must complete their second home purchase by midnight on 31st March 2016 – exchanging alone is not enough.

Some exemptions are as follows:

Caravans, houseboats and mobile homes

Properties worth less than £40,000

Charities and social landlords

Separated couples – for married couples that aren’t divorced but are living apart

Inherited property – for people who have inherited a small share (50% or less) in a property

People might choose to buy a second residence, live in that and yet keep their old property. In these circumstances they would still be liable for the stamp duty charges, however if the old property was sold within 36 months it could be possible to apply for a refund on the additional charges.

For further information about the changes, including the different rates per property value visit the consultation outcome here: 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.