Stamp Duty – What the changes mean for landlords

Buy-to-let landlords are set to face new costs from April 2016 as stamp duty liability tax is set to increase.

Stamp Duty Changes 2016

In his Autumn statement on November 25th 2015 the Chancellor, George Osbourne, announced changes which will see a stamp duty liability tax (SDLT) rate increase for buy to let properties and second home purchases in England and Wales. From April 2016, all buy to let purchases will face an additional 3% stamp duty surcharge. There will also be a new starting threshold of £40,000 which means that more transactions than ever before will be liable for stamp duty.

Anyone owning or purchasing a second property in addition to their main residence is likely to get caught up in the changes. These landlords will be liable for the surcharge even if the property is not let out.

The Exemptions

The types of property that will not fall under the new stamp duty charges include:

  • Caravans and Houseboats
  • Properties worth less than £40,000
  • Charities and registered social landlords.

What are the new rates?

Buy to let and second home stamp duty changes
Band Standard rate Buy to let/ second home rate for landlords (April 2016)
Up to £125,000 0% 3%
£125,001 – £250,000 2% 5%
£250,001 – £925,000 5% 8%
£925,001 – £1.5m 10% 13%
Over £1.5m 12% 15%
Source HMRC

 

For example, if you were to buy a £200,000 second home or buy to let property before April 2016 you would pay a stamp duty of £1,500. This is based on a 0% tax on the first £125,000 of the property value and 2% on the rest of the value between £125,001 and £250,000.

However from April 2016, landlords will have to pay 3% for the first band value of the property and 5% for the second band value of the property increasing their bill to £7,500.

CXG owner, Daniel Pilley said “Whilst this is going to have an initial effect on your cashflow you need to remember that stamp duty is a fully reclaimable capital expense which you can gain when you eventually sell the property. This therefore has far less implications to landlords than the new proposed mortgage rate relief tax that George Osborne has recently announced.”

Key Dates for Exchange of Contracts & Completion

The higher SDLT rates will apply to purchases of buy to let and second homes with a completion date on or after 1st April 2016. If contracts were exchanged before the Autumn statement but the completion date is after 1st April 2016, the higher rates will not apply.

However, if contracts were exchanged after 25th November 2015, the higher rates will apply if the purchase does not complete before 1st April 2016.

An SDLT policy announcement is expected in the next Budget on 16th March 2016.

If you have any questions on the upcoming changes to stamp duty liability tax call a member of the award winning team at CXG Lettings on 01440 712216 or visit our website.

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Posted on: 24 February 2016
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