For homeowners with more than one property, the rules around stamp duty have now changed. The changes came into effect on April 1st, and they will add an extra 3% to the stamp duty bills of people buying a second home. For people who don’t already have a home, then this won’t have any impact. It’s a change designed to hit those wanting to own two homes and buy-to-let landlords who have a portfolio of properties that they own.
The idea is that the changes will level the playing field a little between buy-to-let investors and first-time buyers. That’s because the former will have to pay more than the latter. The market is becoming increasingly hostile to people who don’t have a huge budget. The problem is particularly large in London where prices are rising all the time. Recently, the average price of a home in the UK rose above £200,000 for the first-time. Therefore, it might seem illogical to make it even more expensive to buy a home. But if it succeeds in giving an advantage to first-time buyers, it will be regarded as a success.
What Exactly is Stamp Duty?
Stamp Duty Land Tax is simply the tax that you have to pay when you are buying a property. You’re not allowed to add it to your mortgage though. That means that you can’t pay it off in installments. Instead, you have to pay the stamp duty bill in one go, and this is something that has to be done within 30 days of completing the purchase of your home. Anyone who doesn’t pay this tax will be chased for the money until it’s paid. This is a tax, so failing to pay it is a criminal offence and could be classed as tax evasion.
The current stamp duty rates will stay the same for anyone who does not already own a home. But for people who are purchasing a second home, 3% will be added to each of the tax bands. So, for people with no other home, buying a house worth £125,000 or less will mean that you pay 0% stamp duty. But for people who do have another home, it will be 3% for a home of the same value. This is replicated all the way up to the top band, which means that anyone buying a second home worth more than £1.5 million will now pay 15% rather than 12%.
Are There Any Exemptions?
There are some exemptions that you should know about. The main exemption affects people who inherit a property from someone when they die. If you are left a property in a will, you won’t pay the stamp duty, and you won’t have to pay it if you’re buying a plot of land next to your own. The other exemption in place relates to people who are going through divorce proceedings. Anyone who needs to buy a second home to live in while separated from a partner but before the divorce is finalised will be exempt.
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DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.