The recent Autumn Statement saw Chancellor George Osborne's announcement that those who purchase a second home or a property to use as a buy-to-let will have to pay an additional 3% in stamp duty.
The move, effective from 1 April 2016, will apply to the purchase of additional residential properties exceeding £40,000 in value. The stamp duty surcharge will effectively increase each band by 3% and it is thought that this will be charged on a progressive basis (as shown in the table below).
| Value of Property (£) | Current SDLT Rate | Buy-let/ Second home rate (April 2016) |
| Up to £125,000 | 0% | 3% (over £40,000) |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% | 5% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% | 8% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% | 13% |
| The remaining amount (the portion above £1.5 million) | 12% | 15% |
This will result in buy-to-let landlords who purchase properties from April 2016 paying several thousand pounds additional stamp duty, for example, a property purchased for £125,000.00 following the increase, will result in an additional £3,750 in stamp duty. Some further examples are:
| Value of Property | SDLT at Current Rate (and for first homes post April 2016) | SDLT at Buy-let/ Second home rate from April 2016 | Increase in tax |
| £100,000 | £0 | £3,000 | £3,000 |
| £150,000 | £500 | £5,000 | £4,500 |
| £200,000 | £1,500 | £7,500 | £6,000 |
| £300,000 | £5,000 | £14,000 | £9,000 |
| £500,000 | £15,000 | £30,000 | £15,000 |
The above figures assume that the calculation will follow the post December 2014 method of calculation. If the stamp duty is calculated with a 3% on the set price, similar to the old rules pre December 2014, then the additional costs could be even higher. Whilst the exact effects of this increase in tax will not be known until the announcement is formalised into legislation and further guidance is given from HMRC, this increase will clearly mean higher SDLT for those purchasing second properties.
In light of these recent announcements, those who are planning to purchase a second home or buy-to-let property in the year ahead might want to consider accelerating their plans to ensure that the purchase is completed before the increase comes into effect on 1 April 2016.
At Clapham & Collinge we have a dedicated team of expert solicitors who can provide you with all of the necessary information, support and legal advice, in relation to buy-to-let investments and conveyancing transactions. Contact us today on 01603 693500 or email us using the enquiry form.
