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April’s increase in Stamp Duty Land Tax Residential Conveyancing

April’s increase in Stamp Duty Land Tax

29/01/2016

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As part of George Osborne’s Autumn Statement higher rates of stamp duty land tax (SDLT) were announced.  (SDLT is a progressive tax paid when purchasing a freehold, leasehold or shared ownership residential property over £125,000 in England, Northern Ireland and Wales).  An additional 3% stamp duty rate on any property purchased as either a buy-to-let or a second home (above £40,000) is due to come into force on 1 April 2016.

For a normal homebuyer purchasing a property to live in, as their main home, nothing will change.  The higher rates will be 3% above the current SDLT rates for buy-to-let properties and second homes.

This higher rate will not apply to purchase of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property, given the role of this investment in supporting the government’s housing agenda.

Buy-to-let stamp duty changes 

The proposed higher rates will be 3% above the current residential rates, including the 0% band.

BandExisting residential SDLT ratesProposed additional rates for landlords
£0 – £125K0%3% (note this does not apply to properties valued up to £40,000)
£125,001 – £250k2%5%
£250,001 – £925k5%8%
£925,001 – £1.5m10%13%
£1.5m +12%15%

 

If you buy a second property you will always have to pay the higher rates of stamp duty, even if you plan to live in it and rent your old one.  If you keep your old home at the time of completion you will need to pay the extra stamp duty charges, even if you move into a new main residence.  The only leeways is that you are entitled to a refund of the stamp duty if you sell your old property within 18 months.  This aims to help those hit with delays in the selling process.  You will need to apply for the refund through HMRC. 

For 1 April 2016, purchasers of additional residential properties will have to pay the new higher SDLT rates where they apply.  It is anticipated that a form of declaration will be made in the SDLT return stating that the property is not the purchaser’s primary residence.

The higher rates will not apply to transactions where:

  1. Contracts exchanged before 26 November 2015 where completion takes place on or after 1 April 2016
  2. Contracts exchanged and “substantially performed” (for example, where full payment is made or occupation begins) before 26 November 2015, where completion takes place on or after 1 April 2016
  3. Contracts exchanged before 26 November 2015 where substantial performance or completion takes place no later than the 31 March 2016

If you are currently in the process of buying a property, generally your solicitor or conveyancer will work out the stamp duty you have to pay.  The way you pay your stamp duty is not changing.  As before you will need to submit a stamp duty return and pay what you owe within 30 days of completing the sale of your property.  You still have to submit a return if you are not due to pay any stamp duty on the purchase price of your property, unless the property costs less than £40,000.  It is your responsibility to ensure that the return is completed on time, though more people employ a solicitor or conveyancer to complete the return for them.  On return of a valid stamp duty return, HMRC will issue a certificate which allows you to register your title to the property at the Land Registry, or in Scotland at the Registers of Scotland.

For more information or assistance with any of your conveyancing needs please contact Una Coulson, head of residential conveyancing at Mincoffs Solicitors on 0191 281 6151 or email ucoulson@mincoffs.co.uk.

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