New Stamp Duty Rates for Second Homes: Autumn Statement 2015

The Autumn statement announced that as of 1st April 2016 higher rates of Stamp Duty Land Tax (SDLT) will be charged on purchases of additional residential properties, such as buy to let properties and second homes. The stamp duty surcharge will lift each band by 3%. The table below sets out the rates which will apply.

Here are some illustrations of the financial effect of the changes:

Example 1:

The stamp duty liability for a £250,000 property would have been £2,500 but after 1st April 2016 it will cost £10,000.

Example 2:

A £460,000 property, which is closer to the average home price in London, which currently costs £13,000 in stamp duty, will cost a substantial £26,800 for a buy-to-let property or second home when the new rates come in.

Example 3:

A buy-to-let property costing £2,000,000 will have a £213,750 stamp duty bill as of 1st April 2016, in comparison to £153,750 prior to the changes.

The higher rates will not apply to buyers of caravans, mobile homes or houseboats. There are also proposals to exclude companies with more than 15 properties from the extra stamp duty. The idea behind this exemption is to encourage institutional investment in housing, but it is likely that private landlords with more than 15 properties will form companies to take advantage of the exclusion.

The government stated it intends to use some of the additional revenue to provide £60 million for communities whose property markets are obscurely affected by the prevalence of second homes. It is envisaged that these measures will contribute to doubling the affordable housing budget, which is also part of a wider 5 point plan to address the housing crisis creating opportunities for home ownership. Other measures aside from the higher rates of stamp duty on buy-to-let properties or second homes include 400,000 new homes, extending the Right to Buy scheme, and Help to Buy scheme and reforms to planning systems and financial structures to accelerate housing supply.

For more information please contact Natalie Claydon at [email protected]