Stamp Duty Land Tax - New Legislation - Will It Affect You?

From 1 April 2016, the government has introduced a new Stamp Duty Land Tax (SDLT) to people who buy a second home in England, Wales and Northern Ireland. This includes all buy-to-let properties and all the other permeations of second-home ownership.

The new rules mean that on the day you complete if you own two homes, you will be liable to pay an additional 3% in Stamp Duty Land Tax. The 3% only applies on properties worth more than £40,000 and will still apply even if you are changing your main residence, but have yet to sell your existing home.

You can calculate the Stamp Duty Land Tax you will now pay, by adding the additional 3% onto the rate you would have paid. So, if you were going to pay 3%, you will now pay 6%.

The government has stated that a portion of this new taxation will help people in England where the impact of second homes being purchased is particularly felt. The £60 million they estimate the new Stamp Duty Land Tax levy will bring in, will also help to provide more affordable housing.

But what does this really mean and who will have to pay this additional Stamp Duty Land Tax surcharge?

Any person who has more than one property will have to pay the levy. When you go through the conveyancing process, your solicitor will ask you specifically if you own more than one property. If the answer is yes, you will have to pay.

Any landlords with buy-to-let property will now have to pay an additional 3% on any purchases they make.

If you own a holiday home abroad and you are buying your first home in the UK, you will still be liable for the additional Stamp Duty Land Tax payment.

Even if you are buying a property property to live in as your main residence and you have yet to sell your existing home, you will pay the additional 3%.

While the government removed the Stamp Duty Land Tax lab tax for most purchases in the 2014 budget, meaning you pay Stamp Duty Land Tax in steps, this new levy has reverted back to a slab tax. Therefore, if you are paying £300,000 for your new property, the Stamp Duty Land Tax surcharge is 3% of the purchase price (£9,000). You’ll then need to also pay 2% on the amount above £125,000 to £250,000 and then 5% on the final £50,000. This totals £5,000. Your total liability for Stamp Duty Land Tax is now £14,000.

There is some relief in some circumstances though. You can apply for a refund of the 3% if you sell your main residence within 18 months and only own one property.

If you would like advice on the new Stamp Duty Land Tax, you can contact Christopher Taylor on 01264 325815 or email: ctaylor@bsandi.co.uk  and he will be happy to assist you.