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2016 Stamp Duty Changes

Published 14 March 2016

From 1st April 2016, anyone planning to purchase additional property, including buy-to-lets and second homes, will have to pay an additional 3% of the purchase price in stamp duty. The overall aim is essentially to free-up housing, specifically for first time buyers, by reducing the number of buy-to-let properties.

The additional charge applies above the current SDLT rates. For illustration purposes, anyone buying a £250,000 second home or buy-to-let before April pays stamp duty of £2,500 ie: a rate of 0% on the first £125,000 and 2% on the next £125,000. However, from April onwards the purchaser will have to pay 3% for the first £125,000 and 5% on the next £125,000, meaning that they will have to pay SDLT of £10,000 in total.

The table below illustrates the new rates compared to the existing rates:

sdlt table

The buy-to-let market will clearly be affected. A private buyer purchasing their first home will therefore pay less Stamp Duty on the same property than if it was being purchased by a landlord with the intention to let.

Further implications will apply for landlords or anyone planning to purchase a second property, including:

If you buy a second property, you will always have to pay the higher rate of Stamp Duty, even if you plan to live in it or rent out your old one. It will also not be possible to ‘flip’ your home anymore as the Treasury is now enforcing strict definitions of a “main residence” when it comes to the extra SDLT charge.

Property owned globally will be relevant in determining whether a property purchased in England, Wales or Northern Ireland is an additional property. It will also include a foreign homeowner purchasing a property in the UK or a UK resident with a holiday home.

From 2017, the amount that some landlords can claim in tax relief on mortgage interest and on finance agreements will gradually be reduced over a 4 year period.

If you require additional information, or have concerns on how you might be affected by this change, please contact our Property team on 028 9024 2450.

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