Stamp Duty Changes

21/Mar/2016
Blog Author: 
Hilary Grayson

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The rules for higher rates of Stamp Duty (officially 'stamp duty land tax') for purchases of additional residential properties have now been confirmed. These changes will take effect from 1st April 2016.

The higher rates will be 3% above the standard rates of Stamp Duty but will not apply to: 

  • purchases of property under £40,000
  • purchases of caravans, mobile homes and houseboats.

There are transitional provisions in place that provide that where contracts were exchanged on or before 25th November 2015 and the purchase completes on or after 1st April 2016 the higher rates will not apply. It will be interesting to know how many, if any, such exemptions will exist. I am not aware of any situation in residential property where exchange of contracts and completion takes this long (over 4 months) but, admittedly, I am not a conveyancer.

A useful Stamp Duty calculator is available on the gov.uk website. It is very simple and easy to use and calculates the amount of Stamp Duty due on property purchases. You can find the Stamp Duty calculator here.  

As a bit of fun, you can still calculate the Stamp Duty payable up to and including the last day of March. You can see that, by simply completing a day later, and assuming that you are not simultaneously selling your main residence, the addition stamp duty payable will be £6000.

The rule is that a person replacing their main residence will not be liable to pay the extra Stamp Duty. This applies if the main residence has already been sold or the sale is happening at the same time (in effect, the purchase will proceed after the sale even if on the same date) and remains the case even if the purchaser already has two or more properties. So, private landlords will not be penalised if they move house. 

It also does not matter if the whole horror of being in a chain is too much and someone chooses to sell, rent for a while and then buy at a later date. Renting a new main residence in the time between sale and purchase will not prevent the purchase from being a replacement of a main residence (unless the period of the tenancy agreed is more than seven years). However, if there is a delay selling a main residence and it hasn’t been sold by the time of the completion of the purchase of the new main residence, the purchaser will have to pay the higher rate of Stamp Duty (because they will own more than one property). This being said, it will be possible to claim a refund for the balance between the two rates of Stamp Duty once the main residence is sold (so long as that sale is within three years).

It can get a bit more convoluted for people who are purchasing properties jointly and where any of them already own one or more properties. In such cases the higher rates of Stamp Duty will be payable. Of course, this is potentially unfair to some people looking to purchase their first home and are doing so jointly with someone else – for instance, with parents who already have their own home.  There may be a possibility to obtain the refund. For instance, if a couple buy together but one of them already owns a property, they will have to pay the higher rate of Stamp Duty but will be able to claim a refund if the other property is sold within 3 years.

The law is designed so that the obligation is on the purchasers to make the correct declaration of all the circumstances surrounding any purchase. If someone holds a complicated property portfolio they should take legal, tax and financial advice when moving.

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