Stamp Duty Changes - 5 Frequently Asked Questions
1. When are the changes to stamp duty introduced? Will they kick into effect immediately?
As of 1st April 2016, new stamp duty charges will take immediate effect, so be prepared. To avoid paying the higher fees, you must complete on the purchase of any second home by midnight on 31st March 2016.
On 16th March the Chancellor has confirmed in the Budget 2016 that the changes will go ahead, however the new stamp duty rates will also apply to larger investors.
2. What exactly are the changes?
Put simply, the changes to stamp duty mean that from April, anyone buying second homes or buy-to-let properties in England and Wales must pay an additional 3% on each stamp duty band, which were established in 2014. So the additional Stamp Duty Land Tax rates are as follows:
Band 1: £0 - £125,000 0% plus 3% SDLT rate
Band 2: £125,000 - £250,000 2% plus 5% SDLT rate
Band 3: £250,000 - £925,000 5% plus 8% SDLT rate
Band 4: £925,000 - £1,500,000 10% plus 13% SDLT rate
Band 5: £1,500,000 + 12% plus 15% SDLT rate
Use a Stamp Duty calculator to work out exactly how much you’ll be paying.
However, second homes that cost less than £40,000 are exempt from the new Stamp Duty fees. You will also be exempt if you’re a first time buyer purchasing a buy-to-let property, whilst renting or living elsewhere; this is because you will still only be owning a single property.
3. What if the contracts have already been exchanged, but the process won’t be finished by April?
If you exchanged contracts before 25 November 2015, which was when the Autumn Statement was delivered, you do not have to pay the new Stamp Duty fees.
4. Are there any ways for landlords to make up these costs?
Currently, it seems as though landlords will be able to offset the new costs in the Capital Gains Tax bill if the buy-to-let property is sold later. However, this may well change in the future.
Buying through a limited company will also avoid the 3% Stamp Duty fee for landlords, but it is inadvisable to set up a fraudulent company to dodge the increased cost.
5. What will the stamp duty changes mean for tenants?
We envisage that the stamp duty changes are likely to result in higher rent rates for tenants; this is because the majority of landlords will be raising rents to offset their increased costs.
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