Changes in Stamp Duty Land Tax on Buy to Let Properties

The March 2016 budget introduced higher rates of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties from 1 April 2016. If you are thinking about purchasing a Buy to Let/Investment property and are wondering how this will affect you, we have put together a few questions and answers to help you.

Why is SDLT being increased on Buy-to-Let homes?
With house prices rising, it is become increasingly difficult for first time buyers to get on the property ladder. The Buy-to-Let sector has been a controversial part of the property market for a long time, with people blaming landlords for the rising house prices. As such, George Osborne therefore turned his attention to private landlords in a bid to give first time buyers a chance to get on the property ladder.

How much is this higher rate Stamp Duty Tax?
Higher rates of SDLT will apply to the purchase of additional residential properties that will not be your primary residence. The higher rates will be a 3% increase on the current SDLT rate bands for residential properties. The new rates will be charged on the portion of the value of the property which falls into each band as follows:

£0 to £125,000 – 3%
£125,001 to £250,000 – 5%
£250,001 to £925,000 – 8%
£925,001 to £1.5 million – 13%
Over £1.5 million – 15%

How will this affect me?
Essentially, these rates will apply if the property is not going to be your primary residence. This will mainly affect those with buy-to-let properties and holiday lets, but it will also affect parents buying a property for their children or couples purchasing a home together when the other is already a homeowner.

If you are replacing your main residence, you will not pay the extra 3% SDLT if the property you are buying is replacing your main residence and that has already been sold.

If there is a delay selling your main residence and it has not been sold on the day you complete your new purchase:
• you will have to pay higher rates because you own 2 properties
• you may be able to get a refund (for the amount paid above the normal SDLT rates) if you sell your previous main home within 36 months

Special Rates
These rates are not applicable to corporate or fund purchases that make significant investments in residential property.

What properties aren’t included?
– Caravans
– Mobile Homes
– Houseboats
– Properties bought outside England, Wales and Northern Ireland

What if I am purchasing a property with my partner who already owns a property. Will this be subject to this increase in stamp duty?
Yes. If at the end of the day one of the parties will own two properties, the higher rates will apply

What if I own a property but want to buy a flat for my son or daughter, does this higher rate apply?
Yes. As at the end of the transaction you will own two properties and are not replacing your main residence therefore the higher rates will apply.

However, if you were to give your children financial help towards a deposit or even act as a guarantor on the mortgage, as long as you do not jointly own the property, then the higher rates will not apply.

What if I inherit a property?
Stamp duty land tax is not currently paid on inherited properties.

What if I own a property overseas?
The higher rate Stamp duty land tax will apply if the home you already own (or part-own) is overseas. So if you own a holiday home in Spain, the higher rates will apply if you purchase an additional property in the UK.

When is Stamp Duty Land Tax paid?
Stamp duty has to be paid within 30 days of completion of the purchase of the property. We deal with the submission of the Stamp Duty Land Tax return to HMRC for our clients on completion as part of the conveyancing service.

If you are considering investing in a buy-to-let property, it is important that you are familiar with these new costs and we are happy to discuss any queries you may have. Our experienced and professional property team at Ungoed-Thomas and King can help you with all aspects of the Conveyancing process. We will provide you with a friendly and efficient service without legal jargon, making the transaction as straightforward and stress free as possible for you. For further information please contact us on (01267) 237441 or e-mail us at mail@utk.co.uk