Lisa Sollors, from Stone Rowe Brewer’s Teddington office,
outlines the implications of the higher rate of Stamp Duty that will apply to additional residential properties from April 2016.
I am expecting a busy few months leading up to April 2016 as a number of my clients hurry to complete their purchases. As you may be aware, the government’s 2015 Autumn Statement included proposals for the introduction of higher rates of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties. They also published a detailed consultation paper on 28 December 2015.
This contained information about the proposals and invited comment and responses from individuals and organisations. The consultation period only ran until the end of January 2016 and so it is now too late for you to have your say. However, it is not too late to arm yourselves with the facts and consider the impact they will have on future transactions.
The higher rates of SDLT, which add 3% to the current SDLT rates, take effect from 1 April 2016 and will apply to certain purchases of residential property. In broad terms, those affected by the higher rates will be those who purchase a buy to let investment property or second home.
An important factor in calculating whether you will need to pay more is your “main residence” as the higher rates apply where this is retained and another residential property purchased. It is not just the purchase of a buy to let property that triggers the higher rate; if at the end of the day of the transaction you own two or more residential properties, whether you pay the higher rates or not will depend on whether (within a period of 18 months) you are replacing your main residence.
Most people own their main residence, however, and will need to budget for a higher SDLT payment if they purchase a further residential property. The usual, linked sale and purchase of a home will not be affected because in this situation you are replacing one main residence with another main residence. It is even the case that there is some relief for those who make a temporary additional purchase – for example where a chain breaks and you decide to go ahead with a purchase pending the later sale of your home. You will need to pay the higher rate at the time but, as long as the sale goes through within 18 months, the proposals provide for reimbursement of the additional SDLT paid.
One key point I noted from the consultation paper was that all first purchases of residential property by a company will be subject to the higher rates regardless of the circumstances. Whilst this seems unfair, the rationale is to limit potential avoidance schemes where purchasers set up a company in an attempt to avoid payment of tax. I am sure that we will all be finding our way around the SDLT changes for some time but, forewarned is forearmed as they say!
At Stone Rowe Brewer we are always happy to assist if our clients require additional information but, in the first instance, it would be a good idea to take a look for yourselves and review in light of your own circumstances. The consultation paper can be accessed by going to: www.gov.uk/government/organisations/hm-treasury.
If you would like to make an appointment to discuss your own situation, please call Stone Rowe Brewer on 020 8891 6141 and ask to speak to one of our Property Team.