In April 2016 anyone that buys a second property will have to pay an extra 3% in stamp duty. This additional stamp duty is payable by anyone buying a second home worth more than £40,000. This applies if someone relocates and decides to rent out their first property right through to investors that own some buy-to-let properties.
The Stamp Duty Land Tax (SLDT) of 3% is in addition to all previous SDLT rates. So for example before April 2016 if you bought a property that costs between £125-£250K the stamp duty was 2%. From 6 April 2016, the stamp duty has been increased to 5%. This is a significant increase and will have an impact on the number of new properties a landlord can buy.
To illustrate the amount of stamp duty that is payable here is a simple example:
For a property purchased for £500,000, the stamp duty would equate to 8%, so you would have a total payable of £30,000 in stamp duty.
It's worth looking at a few scenarios to help you understand how this could affect you.
Relocation
There are cases where a professional person has to relocate with work and decides that they don't want to sell their first property, or maybe they are struggling to sell the property. In this situation, they will need to pay the additional stamp duty. But if they sell the first property within 36 months of making the purchase they can claim a refund from the HMRC.
Share in a property
There may be cases where you own a share of another property, for example, if you are separating from your partner or getting a divorce. If the share is worth more than £40,000 or more, then you will have to pay the extra stamp duty. However as with the above scenario if you sell your share in the first property then you can claim a refund. There are some three-year rules to take into consideration before claiming so make sure that you fully understand these.
Buying as an investment
If you are buying a portfolio of property for investment purposes, then you have to pay the extra stamp duty on each new purchase. You cannot avoid the tax levy by setting up a limited company.
There are lots more scenarios of when you have to pay the extra stamp duty and when you can claim a refund. If you want to find out more, then please do give us a call on 01623 490 120 or email