The new rate will depend upon the value of the property and will range from 3% to 15%. Details are below:
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How much will stamp duty cost?
Value Existing stamp New stamp duty
duty rate rate on
additional properties
£0 – £125,000 0% 3%
£125,001 – £250,000 2% 5%
£250,001 – £925,000 5% 8%
£925,000 – £1.5m 10% 13%
£1.5m + 12% 15%
By example, if you buy a second home, or a buy-to-let property valued at £150,000: under current rules you would pay stamp duty of £500 (£0 on the first £125k and 2% on the balance of £25k). If your completion takes place on or after 1 April 2016, you will pay £4,900 (3% of the first £125k and 5% of the balance of £25k).
Will it affect you?
The changes will affect domestic and foreign purchasers.
If, at the end of the day on which you buy the property:
- You only own one property. You will not pay the new rates – no matter how you intend to use the property you have bought. For example, if you live in rented accommodation and buy the property as a buy-to-let – as long as you own only one property, you will not pay the higher rate.
- You own two or more properties, but the new property you have bought is to replace your existing property as your main home, which you have not yet sold. You will pay the increased rate, but can obtain a refund if you sell your existing home within 18 months.
- You own two or more properties and the new property is not being bought to replace your main home. You will pay the new rate.
I am buying the property for my child, will I have to pay?
That depends. It is not only those who are purchasing buy-to-let properties who will be affected, i.e. landlords, but anyone who already owns a home and buys a second property. If you help to buy the property and become a joint owner, you will have to pay the increased rates. However, if you help your child to buy a property in his/her own name by giving them money towards a deposit, for example, and it is your child’s only property, they will not pay the higher rate – even if you act as a guarantor on the mortgage.
I own a limited company, can I escape the stamp duty increase?
No. If you are buying the property through a limited company, you may be able to escape the recently announced reduction to mortgage interest relief, but you will still have to pay the new stamp duty rates. The government is currently discussing whether there will be an exemption from the higher rates for those making “significant investments in residential properties, given the role of this investment in supporting the government’s housing agenda”.
Will I have to pay if I intend to live in the second property?
Yes. The new rules will be strict. If you move into the second property and rent out your first one – even if that is your main residence at the time of purchasing the second one, you will still have to pay the new rates. If you do sell your first property within 18 months you can apply to HMRC for a refund of the overpaid stamp duty.
What if we buy the second property in my wife/husband’s name?
It won’t make any difference. Married couples and civil partners will be treated as one unit, unless they are separated:
- Under a court order; or
- By a formal deed of separation executed under seal
So if one of you already owns a home, the second property you buy will be subject to the new rates. The proposals are also likely to affect unmarried couples.
What if I buy a property with someone else?
If at the end of the day of the transaction one of you owns two or more properties, the second purchase will be subject to the higher stamp duty rate. However, as the government understands that it may be the first property for one of the purchasers, this was the subject of one of the questions in the consultation now under consideration.
What about property owned abroad?
If you already own a property abroad and buy a second property in England, Wales or Northern Ireland, you will have to pay the new stamp duty rates. Purchases outside these jurisdictions will be subject to the rules of property transactions in that jurisdiction.
What if I live in property that is provided by my employer?
You will not have to pay the higher rate on the purchase of a residential property if it the only one you own – even if you intend to rent it out.
I’ve inherited a property and I already own one. Will I have to pay the new rates?
No. You do inherited property is not subject to stamp duty. However, if after inheriting the property you then sell it and buy another property, and you still own your own home, you will pay the higher rate on the new property.
Are there any exemptions?
Yes.
Houseboats, caravans and mobile homes
- Properties under £40,000 (Properties that you already own or lease that are valued under £40,000 will not be taken into account when buying a second property).
- Charities and social landlords (registered)
- If you already own over 15 properties (part of the consultation)
- Bulk purchases of over 15 properties (part of the consultation)
The government indicates that the new stamp duty rates will increase its revenue by £1 billion by 2021 and that it will use some of it – £60 million – for communities in England where the impact of second homes is acute.
Consultation on the changes came to an end on 1 Feb 2016 and the government will announce its final policy in the March budget. You can read the government’s full consultation document here.
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