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Stamp Duty Increase Sees Buy-to-Let Completions Surge

There has been a noticeable surge in the number of buy-to-let investors wanting to purchase ahead of the stamp duty increase on 1 April 2016.

An extra 3 per cent stamp duty land tax (SDLT) above the current SDLT rates is being introduced from 1 April which means that anyone purchasing an additional residential property as a second home or buy-to-let will end up paying a significant amount more for the property.

The table below sets out current and additional SDLT rates.

Band Existing residential SDLT rates New additional property SDLT rates
£0* - £125k 0% 3%
£125k - £250k 2% 5%
£250k – £925k 5% 8%
£925k - £1.5m 10% 13%
£1.5m +12% 12% 15%

*Transactions under £40,000 do not require a tax return to be filed with HMRC and are not subject to the higher rates.

At the moment, SDLT is 0 per cent on the first £125,000 and 2 per cent on anything between £125,001 and £250,000. But come 1 April 2016, second home owners and buy-to-let landlords will have to pay 3 per cent on the first £125,000 and 5 per cent between £125,001 and £250,000.
Buy To Let
To put this into context, if you were to buy a second home or buy-to-let for £200,000 after the 1 April 2016 deadline, you would have to pay a stamp duty bill of £7,500 (based on 3 per cent for the first £125,000 and 5 per cent, instead of 2 per cent, on the amount between £125,000 and £250,000). Before 1 April 2016, it would only be £1,500 (based on 0 per cent on the first £125,000 and 2 per cent on the portion between £125,000 and £250,000), so the additional SDLT increase would see you paying five times the amount.

It’s not just buy-to-let landlords that will feel the effect of the stamp duty increase. Anyone who owns a second property that isn’t their main residence and buying another, or replacing the one that they don’t live in, is going to get caught up in the changes. This could be parents buying a property for their children or a couple purchasing a home together where one is already a homeowner. If you want to sell your main place of residence and buy a new house then you won’t be affected, but if you’re looking to buy a second home then you will be.

Here’s a chart produced by the Government to help you find out if you will be affected:
SDLT Diagram
There are some properties that will be exempt from the higher SDLT rates. These include caravans, mobile homes and houseboats. You don’t currently have to pay stamp duty on these types of properties, and you won’t have to after 1 April 2016.

The Government is considering exemptions for those buying properties in bulk. They are proposing that companies owning 15 or more residential properties could be exempt from the higher SDLT rates. The position on individuals buying in bulk is also under consideration.

If you are considering buying a second home, or buying a property to let, you will need expert advice to help you through the process. You need to contact an experienced property lawyer as soon as possible for you to stand any chance of beating the 1 April 2016 deadline. If you are reliant on bank funding, you should ensure that you contact a lender who can move quickly to process your application. You are at more risk of missing the deadline because of a property chain as this may fall through.

Slater and Gordon property lawyers have many years’ experience guiding buyers and sellers through the conveyancing process and are used to turning things round quickly in realistic timescales. Bear in mind that certain steps must be carried out and the sooner you contact a property lawyer, the more chance you stand of beating the 1 April deadline.

Call us 24/7 on freephone 0800 223 0084 or contact us online and we will call you.

Property, Property Lawyers

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