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27th April 2016
2016 has seen already significant changes for those buying and selling houses, with a 3% increase in Stamp Duty on buy-to-let properties, which came into effect on April 1st.
This is a result of George Osbourne’s belief that “people buying a home to let should not be squeezing out families who can’t afford a home to buy”, and thus applies to anyone purchasing an additional residential property, such as a second home, buy-to-let or holiday rental.What does the new stamp duty change for you? Read on to find out.
Unlike current stamp duty land tax, which operates on a tiered system, this extra 3% applies to the entire value of any buy-to-let property. The charge applies on top of your current tax, meaning that homes that previously paid no stamp duty now owe 3%, while homes that previously paid 5% stamp duty now owe 8%.As an example, purchasing a buy-to-let property for £150,000 would previously have incurred 2% tax only on value above the first £125,000, resulting in a total stamp duty payment of £500.
With the new measures, however, an additional 3% of the entire property would be added to that initial £500, taking your total stamp duty payment up to £5,000. As we have seen over the last three months, the announcement of this stamp duty change dramatically increased demand for buy-to-let property in the lead-up to April 1st. As a result, many landlords have spent significantly more on properties during 2016, even before the stamp duty surcharge.
The new stamp tax will come as a breath of fresh air to first-time and younger buyers, who have previously had trouble getting onto the property market, as they have been competing with private landlords. This has meant that many would-be homeowners are instead choosing to rent, meaning that the demand for rented properties - and thus the buy-to-let market - is increasing even further.
By breaking this cycle, the 3% increase will hopefully create a gap in the market for first-time buyers to step in and get a foot on the property ladder, or for residential buyers to take the next step.If you’re buying a new home with the intention of sell your current home in the near future, you will need to pay the new stamp duty initially. However, if you sell your original property within 36 months, you will receive a full refund on the extra tax paid.
Don’t get stumped by stamp duty. Use our quick and easy stamp tax calculator to calculate the cost of your move, whether you’re buying your first home, or buying a property to let to others!