From 1st April 2016, the rate of stamp duty Land Tax will rise by 3% on the purchase of a secondary property, whether this is a second home or a buy-to-let. This increase will follow the same tiered system currently in place for primary residences, but with the higher rates (see table below)
||2nd home/BTL rate (from 01/04/16)
|Up to £125,00
How the stamp duty tiers are applied
As an example, from 1st April 2016, if you buy an additional property for £350,000 the breakdown of duty is as follows: 3% on the first £125,000; 5% for the next price bracket to £250,000 and 8% on the remaining amount above £250,001.
The calculations on a purchase of a £350,000 2nd home would be:
3% of £125,000 = £3,750
5% of £250, 00 - £125,000 = £6,250
8% of 100,000 = £8,000
TOTAL = £18,000
Will these changes affect all property purchases?
The increased SDLT charges will only be applied to property purchases in England, Wales and Northern Ireland where this represents the purchase of property additional to a main residence.
If you are replacing one permanent home with another, this is not considered an additional property, and the new rates will not apply.
However, if you do not complete on a sale but do complete on a purchase, this effectively means you own two properties and the higher rates will apply to the purchase. It will be possible to obtain a refund by selling the former residence within 18 months of the purchase.
What rates apply if I own a primary residence abroad and buy a second property in the UK?
The purchase of any second home means the higher rates will apply, regardless of whether the main residence is abroad or in the UK. The consideration will apply to ‘property owned globally’. Thus, if property is owned and retained anywhere else in the world, for a purchase is in the UK, the higher rates will apply.
Married Couples and Civil Partners
Married couples and civil partners living together will be treated as one unit. If, as a unit, they own one property at the end of the day of a transaction, they will not pay the higher SDLT rates. If either of them owns more than one residential property, they may pay the higher rates when purchasing another property.
Purchasing a Property for Children
The higher rates will apply to the situation of the property owner. If parents purchase a property for their child and keep the property in their own name whilst retaining ownership of their main residence, they will be liable for the higher rates on the purchase of the property for the child. If they assist with the purchase but do not actually own the property, the higher rates will not apply.
The government is proposing that a company which owns 15 or more properties shall be exempt from the higher rates.