Buy-to-let and the new Stamp Duty Land Tax changes


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By Linda Mulrooney

As from 1 April 2016 the Government are increasing the rates for Stamp Duty Land Tax (“SDLT”) for anybody purchasing a buy-to-let property or a second home. The detailed rules will be announced in the Budget on 16 March 2016.

The proposed changes to Stamp Duty Land Tax rates are set out below:-

BAND EXISTING RESIDENTIAL SDLT RATES NEW ADDITIONAL RESIDENTIAL RATES
£0-£125k 0% 3%
£125k-£250k 2% 5%
£250k-£925k 5% 8%
£925k-£1.5m 10% 13%
£1.5m and over 12% 15%

 

5 THINGS YOU NEED TO KNOW ABOUT THE NEW CHANGES TO STAMP DUTY LAND TAX

  1. Anyone who is purchasing an additional residential property, for example, a buy-to-let or a holiday home, in England, Wales and Northern Ireland will be liable to pay the new rates if the property is purchased after 1 April 2016. If you are in the process of purchasing such a property it will be in your interests to try and complete this before 1 April to avoid the extra tax.
  2. The new charges will still affect you under the following circumstances:-
  • if you already own a property overseas;
  • if you have a beneficial interest in a property under a trust (depending on the type of trust);
  • if you are purchasing a second property jointly and one of the buyers does not own other residential properties. In this instance SDLT will be charged on the whole purchase price;
  • if you decide to rent out your main residence and buy another property to live in.
  1. SDLT will be charged as a 3% surcharge above the current SDLT rates over the value of the whole property. For example, if you are purchasing a buy-to-let property with a purchase price of £250,000, stamp duty will be charged as follows:-

The first slab up to £125,000 will be charged at 3% = £3,750.00

The next slab between £125,000 and £250,000 will be charged at 5% = £6,250.00

Total SDLT = £10,000.00

At the present rates, the SDLT charge at this value would be £2,500.00.

  1. A second property being purchased for less than £40,000 will not be subject to the new SDLT rates.
  2. It is very important to tell your solicitor if you are purchasing a buy-to-let property or a second home. Not to tell them is potentially fraudulent and could lead to substantial penalties.

If you require further advice on this subject, please do not hesitate to contact our Property team.

Linda Mulrooney is a property executive in the residential property team at Barker Gotelee, solicitors in Ipswich

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