This was no April Fools joke, as from 1 April, if you acquire a second property you will pay an additional 3% stamp duty levy on its purchase price.
Higher Stamp Duty (SDLT) on the acquisition of a second property is levied on a tiered basis as follows:
Portion of purchase price: Stamp Duty payable as at 31 March 2016 Stamp Duty payable from 1 April 2016
Up to £125K 0% 3%
£125k-250k 2% 5%
£250k-925k 5% 8%
£925k-1.5m 10% 13%
In excess of £1.5m 12% 15%
The Chancellor announced his plans in his Spending Review and Autumn Statement in November 2015. Following the consultation period the final details were revealed on 16th March 2016. To read the full detail of the consultation outcome please click here
This new charge does not only affect landlords, but people buying homes which could be considered as second properties by the nature of their personal circumstances, but in reality they are purchased for living in and not for investment or to let.
It is worth highlighting how the Government intends to apply SDLT in more complex or unusual situations
If you own or partly own a property overseas, your UK property will be considered as your second property and will be subject to the higher rate SDLT.
If you have inherited a small (undefined) share in a property anytime within the 36 months prior to the acquisition of a property, the acquired property will not be considered as your second property and so will not be subject to the higher rate SDLT.
Couples who are separated and the situation is likely to remain that way, will be treated as divorced by the authorities for the purposes of applying the higher rate SDLT.
If you leave a relationship in difficult circumstances, but remain on a joint mortgage and have to purchase a new home to live in, the new home will be subject to the higher rate SDLT. However if your previous home is sold within 36 months of the date of the purchase of your new home, you can claim a refund of the additional SDLT that you paid when you bought it.
In most cases a situation will be straightforward. However, if you are unsure, or your circumstances are complex, it’s wise to ask for professional advice as there is rarely a 'one size fits all’ answer.
If you have any questions about the tax implications of buying a second property please contact me.