Changes to Stamp Duty From 1 April 2016
In a blow to those looking to expand their residential property portfolio, the government has announced a 3% surcharge on stamp duty payable on the purchase of additional residential properties.
Essentially, if you already own a residential property and you plan to add another residential property to your portfolio then you will see a 3% rise across all stamp duty bands from 1 April 2016, including the current nil rate band applying to properties purchased for less than £125,000.
The legislation will typically affect landlords expanding their residential portfolio or those looking to purchase a second or holiday home, but the rules as they currently stand are far reaching and could catch:
- Parents helping their children get onto the property ladder by taking out a joint mortgage
- Parents buying a second property for their children to live in
- People who own a property abroad and buy a second property in the UK
- Separated married couples or civil partners unless they are separated under a court order or formal Deed of Separation
- A joint purchaser buying their first property when the other joint purchaser already has a second property that isn’t a main residence being replaced by the new purchase
- The beneficiaries of a trust that holds residential property
- Partnerships
- Companies purchasing their first property
There are some exclusions from the surcharge, notably:
- The replacement of a main residence with another main residence
- Residential properties purchased for less than £40,000
- 6 or more residential properties purchased in a single transaction (although the rules here become complicated)
- Residential properties purchased by charities or social landlords
- Forests and agricultural land
- Bare land, even if it will subsequently be used for residential purpose
- Commercial properties
- Mixed use properties
Property ownership arrangements can be very complicated for various reasons so, as you can see, what used to be a relatively straight forward tax for most people is about to become a whole lot more complex.
With all of the upcoming changes in property taxation the decision to invest in property, now more than ever, needs to be appraised prior to purchase. If you are thinking of investing in property then please get in touch to discuss your options.
