Posts Tagged ‘stamp duty’

Stamp Duty increase penalises home buyers

Wednesday, June 1st, 2016

There has been much press commentary regarding the extra 3% Stamp Duty Land Tax (SDLT) and the 3% Additional Dwelling Supplement (ADS) – part of the Land and Building Transaction Tax in Scotland – that applies to the purchase of a second residential property by individuals in the UK from 1 April 2016.

Home owners should be wary as this can more than triple the initial Stamp Duty costs of buying a second home in the UK.

The rules are strictly applied. For example, if a homeowner wants to move house, but is finding it difficult to sell their existing home, they may decide to complete on the purchase of their replacement home and press on with trying to complete the sale of their present home at some future date.

The problem is, HMRC or Revenue Scotland will still apply the 3% extra duty even though the intention is to replace one property with another. At the time the replacement property was purchased, the buyer owned two residential properties at the end of the day the deal was completed. As such, the replacement purchase was a second property.

Homebuyers caught in this position should seek advice and quantify the amount of the extra duty they will have to find. However, all is not lost. It is possible to claim a refund of the additional 3% paid but there are time limits. In England Wales and Northern Ireland, the replaced property must be sold within 36 months of the replacement purchase; whereas in Scotland the time limit is only 18 months.

Home owners may be caught by stamp duty increase

Friday, May 6th, 2016

From 1 April 2016, buyers of residential property that is not to be their main residence in England, Wales and Northern Ireland, will be liable for the higher rates of Stamp Duty Land Tax (SDLT). Basically any property subject to the higher rates, that costs more than £40,000, will be charged at the following rates:


Where applicable, the higher rates will be 3% above the standard rates of SDLT that apply to purchases of residential property. Each rate will apply to the portion of the consideration that falls within each rate band: Purchase price of property Rate paid on portion of price within each band
Up to £125,000 3%
Over £125,000 and up to £250,000 5%
Over £250,000 and up to £925,000 8%
Over £925,000 and up to £1,500,000 13%
Over £1,500,000 15%

These higher rates will be charged even if a home owner buys a replacement for their main residence before their present home is sold. This could create cash flow problems for the buyer.

For example, a residential property purchased as a main residence for £250,000 after 1 May 2016 would be liable for a SDLT charge of £2,500. If their present home is not sold before they purchase a replacement, then the purchase will be subject to the higher rates of SDLT that would amount to £10,000.

It will be possible to reclaim the £7,500 additional SDLT but only if a previous main residence is sold within 3 years of paying the higher rates on a new main residence. A refund can be claimed by making an amendment to the original SDLT return. Repayments need to be claimed within 3 months of the sale of the previous main residence, or within 1 year of the filing date of the return, whichever comes later.

For house purchases in Scotland a similar situation arises. The purchase of a replacement home before the existing main residence is sold would be subject to an additional charge to Land & Buildings Transaction Tax. In Scotland, the 3-year period is reduced to 18 months.

Stamp Duty increases buy-to-let

Thursday, April 7th, 2016

From 1 April 2016, individuals who purchase additional residential properties, second homes or buy-to-let properties will pay an additional 3 percentage points above the existing SDLT rates. The higher rates are:

  • £0 – £125k: 3%
  • £125k – £250K: 5%
  • £250k – £925k: 8%
  • £925k – £1.5m: 13%
  • Over £1.5m: 15%

This will add a considerable on-cost for landlords and families that venture into multiple property acquisitions. Without this change, a residential property purchased for £250k would have had a SDLT charge of £2,500. Under the new rates this will increase to £10,000.

Properties purchased for under £40,000, caravans, mobile homes and houseboats will be excluded from the higher rates. Furthermore, small shares in recently inherited properties will not be considered when determining if the higher rates apply.

The budget also clarifies when companies making residential property purchases will be subject to this additional SDLT charge.

In the lead up to the budget it had been speculated that significant, incorporated property businesses would be able to avoid the increase. It would appear that this is not to be.

In the notes to the budget it is clearly stated:

“Companies purchasing residential property will be subject to the higher rates, including the first purchase of a residential property.”

Accordingly, setting up a new company for each property acquisition or transferring existing portfolios into corporate structures will not allow landlords to avoid the additional rates of SDLT on post April 2016 acquisitions.

Indirectly, these changes will also affect sellers of residential property as the SDLT increases may dissuade marginal buyers from purchasing. Will we see affected house prices falling?

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