The stamp duty rate for people who have a second property increased on April 1st 2016. What will you pay?
Stamp duty if you have a second property
If you buy a second property or a buy to let home, and completed the sale on or after 1st April 2016, you have to pay stamp duty at a higher rate than if you bought a home to live in.
SAVVY TIP: These changes affect England, Wales and Northern Ireland, but not Scotland, which has its own Land and Buildings Transaction tax (although this is also rising by 3% for second properties).
The changes mean:
- A higher rate of stamp duty (stamp duty land tax, to give it its full name) will be charged when you buy a second property on or after April 1st 2016.
SAVVY TIP: If you’d exchanged contracts by November 25th 2015 (which is the date of the Autumn Statement) but not completed by April 1st 2016, you wouldn’t have been affected by these changes, even if you owned two or more properties.
- Stamp duty is applied on all second and buy to let homes costing more than £40,000. This is a lower threshold than for property you own that you live in. In England and Wales, you don’t pay stamp duty on a property costing less than £125,000.
How much is the higher stamp duty rate?
The stamp duty rate for second properties from April 1st 2016 is 3% above the existing rates. As with the stamp duty rates for residential properties, the stamp duty rate is tiered, so you could pay several different rates of stamp duty depending on the price of the property you buy.
- Property band £0 – £40,000: current residential stamp duty rate is 0%. Additional property stamp duty rate is 0%
- Property band £40,001 – £125,000: current residential stamp duty rate is 0%. Additional property stamp duty rate is 3%.
- Property band £125,001 – £250,000: current residential stamp duty rate is 2%. Additional property stamp duty rate is 5%.
- Property band £250,001 – £925,000: current residential stamp duty rate is 5%. Additional property stamp duty rate is 8%.
- Property band £925,001 – £1.5 million: current residential stamp duty rate is 10%. Additional property stamp duty rate is 13% stamp duty.
- Property band over £1.5 million: current residential stamp duty rate is 12%. Additional property stamp duty rate is 15%.
Who has to pay the higher stamp duty rates?
It’s not just buy to let landlords who will have to pay higher stamp duty rates. The higher rates apply to anyone who owns two or more properties at the end of the day when they complete on the purchase, unless they sell their main residence and buy another property.
So, if for example you have two properties: the home you live in and a buy to let property, you won’t pay the higher stamp duty rate if you sell your main home and buy another property to live in. However, you would pay the higher rate of stamp duty if you were to keep your main home and sell your buy to let property and buy another buy to let property.
SAVVY TIP: There is an exemption, which applies if you buy a second property. In this case, although you’d have to pay the higher stamp duty, you would quality for a refund as long as you sell your existing home within three years of completing on the purchase. In order to get this refund, the home that you’re selling within three years must have been your ‘main residence’ as well.
Stamp duty and married couples and civil partners
If you’re buying with your husband, wife or civil partner, you won’t have to pay the higher rate of stamp duty if you only own one property at the end of the day you complete. But if you own more than one property, you may be charged the higher stamp duty rate.
SAVVY TIP: The government treats married couples as one ‘unit’, so you can’t own one property each and get exemption from the higher stamp duty rate. You can only own one property between you.
So if you’re buying a home with your husband, wife or civil partner and they already own a property (or you do), you’d have to pay the higher stamp duty rate and, unless the second property was sold within 18 months and it was your main residence, you wouldn’t be able to get a refund.
SAVVY TIP: If you’re buying a property with someone else but you’re not married to them, you’d have to pay the higher rate of stamp duty if, for example, one of you decides to buy a second property to rent out or one of you already owns a property that they’re not selling.
Changes to payment of stamp duty from 2017
This doesn’t only apply to buy to let landlords, it applies to anyone who has a property. From 6th April 2017, stamp duty will have to be paid within 14 days of buying a property, not the current 30 days.
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