As of April 2016, homeowners with more than one property will be liable to pay a new higher rate stamp duty.
Stamp duty increases at a glance
The purchase of additional residential property, will attract a rise of 3% in stamp duty from April 1, 2016.
This additional charge will be above the current ‘stamp duty land tax’ rates.
- 3% tax on homes that cost up to £125,000
- 5% tax on homes between £125,001 and £250,000
- 8% tax on homes between £250,001 and £925,000
- 13% tax on homes between £925,001 and £1.5m
- 15% tax on homes worth over £1.5m
The Autumn Statement did not cover all of the new rules that will apply, but the Treasury has published a consultation document. This suggests the following answers to a few situations:
The property I live in is a rental property, but I own a property as a buy-to-let
The consultation provided this diagram:
I own the home I live in and a buy-to-let property. What if I sell my main home?
The consultation suggests that in this situation you would not pay the higher stamp duty charge. This is because you would be buying a home rather than a second property. This also suggests that any charges will not be applied retrospectively if you own more than one property.
Can we own two properties between us without being charged?
The consultation suggests that the ‘one unit’ test will be applied here; married couples and civil partners who purchase second and further properties, whether together or separately will incur the higher rate stamp duty charge.
What about helping our children to get onto the property ladder?
In the past, parents acting as a guarantor on their child’s mortgage achieved this: they were not part owners of the property. The main issue here is that lenders are simply not offering this type of mortgage now. This has meant that joint mortgages have been applied for with the parents having their names put on the title deeds. Therefore, under the April 2016 changes, these types of purchases will attract the additional charges.
Until I sell my previous home, I will own two properties
According to The Treasury, whether a purchase counts or not as an additional property is if the buyer owns two properties at the end of the transaction day. If they do, they will incur the extra stamp duty charge. If the first home is sold within 18 months, then the additional stamp duty paid can be claimed.
I own a property solely and we are buying a house jointly
In this situation, the Government has decided that the purchase would incur the higher rate of stamp duty. This would be because one of the parties will own two at the end of the transaction day.
How will this affect my Capital Gains Tax Bill?
The document suggests that investors will be able to take additional stamp duty charges, as well as other purchasing costs for the property, from the price they achieve in a sale. Therefore potentially reducing future capital gains on the property.