Stamp duty land tax changes 2016

Stamp duty land tax changes 2016


We recently reported some of the tax changes that were announced last year following George Osbourne’s Budget – http://www.keylet.co.uk/news/tax-changes-affect-landlords-2016

Another significant tax change for the property industry is the announced plans to introduce a higher rate of higher Stamp Duty Land Tax from the 1st April 2016. The proposed changes were part of a consultation which ended on the 1st February 2016, and once the government has considered all responses it will confirm its final policy in the Budget on 16th March 2016.

The changes

  • Higher SDLT charged at 3% to support home ownership.
  • Higher rates to be applied to most purchases of additional residential properties.
  • Higher rates to be applied to purchases of additional properties by companies.
  • First time buyers, or home movers will be unaffected by these changes.

Who’s affected?

Anyone purchasing an additional property is potentially affected, married couples and civil partners living together will be classed as one unit. This means that any properties owned by either partner will be taken into account when an additional property is being purchased. Therefore, individuals could be affected if they wish to purchase a property but their spouse or partner already has one.

When will the changes take place?

The higher rates of SDLT will apply to any additional properties purchased that complete on or after 1st April 2016. If contracts were exchanged after 25th November 2015 then the higher rates will apply if the purchase is completed on or after 1st April 2016. However, if contracts were exchanged on or before 25th November 2015 but not completed until on or after 1st April 2016, then the higher rates will not apply.

 

Band Existing SDLT rates New SDLT rates
£0*-£125,000 0% 3%
£125,001-£250,000 2% 5%
£250,001 – £925,000 5% 8%
£925,000 – £1,500,000 10% 13%
£1,500,000 + 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.

 

Other cases:

  • Employer provided accommodation – Work related accommodation which is provided and owned by an employer does not count when considering whether an individual is purchasing an additional property or not.
  • Furnished holiday lets – The government proposes that properties bought as furnished holiday lets should be treated in the same way as all other residential properties – if the property is purchased as an additional property the higher rates will apply.
  • Timeshare properties – In most instances, timeshare agreements are not chargeable for SDLT purposes and therefore the higher rates will not apply to purchases of timeshares.
  • Caravans, mobile homes and boat purchases – The ownership of a caravan, mobile home or houseboat will not be taken into account when determining whether a new property purchase by an individual is an additional property.
  • Social landlords – The SDLT system currently includes exemptions for some residential property purchases made by charities and registered social landlords

 

Overview

To summarise, it seems that a higher rate of SDLT will be charged when a buy-to-let or second home is purchased in addition to a main residence. The changes will take affect if completion is after 1st April 2016. An exception of the higher charges would be if the property being purchased is replacing the individual’s main residence. If a sale of a main residence has not completed at the time of the purchase the higher rate will apply, although a refund of any additional SDLT can be claimed for as long as the main residence is sold within 18 months.

 

For more information and to read the full consultation report:

https://www.gov.uk/government/consultations/consultation-on-higher-rates…

Published: February 5, 2016

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