As a leading removals and storage company in Oxfordshire, we wanted to inform you all of the changes to stamp duty. From April 2016, changes to stamp duty will mean that buy-to-let and second or holiday home buyers (including overseas) will have to pay an extra 3% on top of their stamp duty tax band when buying a new property.
Here is our quick Q&A on the new stamp duty on property charges and how they could affect you.
Why has the government hiked up the rates?
It’s part of a UK government initiative to free up houses for first-time and single home buyers - and to add money to the treasury. It’s expected to net the exchequer around £625m next year and £880m by 2020.
What does it mean?
It will add thousands onto any secondary property ownership and according to a recent survey by the Residential Landlords Association it’s estimated that over 60% of buy-to-letters will now belong in a higher tax bracket.
If you are purchasing another property for any reason, you’ll be subject to this tax. Even if you are helping to buy a property for your children to live in while they’re at university, or if you are part of a couple purchasing a joint home together when you already own property.
How much is stamp duty on second properties?
Here are three simple stamp duty calculations to give you an idea of what you might pay before and after the increase:
Any stamp duty on second property exemptions?
If you purchase a houseboat, a caravan, mobile home or a house under £40,000, you are entitled to this stamp duty exemption. Also in Scotland, where stamp duty on property has now been completely abolished you won’t be liable, however second homes are still subject to the Land and Buildings Transaction Tax (LBTT). The LBTT is also allowing a 3% rise on additional properties, so they’ll be very similar across the board.
What if I’m in the process of buying a second home?
For this new stamp duty exemption, second home buyers and buy-to-letters must complete on their purchase before midnight on 31st March (unless the exchange took place on or before 25th November 2015).
Is it affecting landlords now?
The stamp duty changes are currently having two polar effects. The buy-to-let and second home markets are really buoyant right now, with lots of property owners trying to get completions happening before the rates go up. This January, almost a quarter of estate agents reported an uplift in buy-to-let sales from landlords looking to sneak in before changes apply.
But equally, it’s predicted by the National Landlords’ Association that over 500,000 properties will be sold in the next 12 months, which could create a dearth in rentable properties, particularly in London, where over half of the properties are over £500k to purchase. The impetus to sell has more than doubled since July 2015 and will reach a head this year once the stamp duty on property changes come into force.
What about those landlords who want to sell their property?
For those landlords who are panicking about the new increase and want out of the buy-to-let market but, in doing so, will need to sacrifice their main residence, there’s a grace period. This is where the government has offered 18 months in which to buy a new main residence without paying the extra high rates. So if you sell your first home within 18 months of completion of your second home, the 3% surcharge will be refunded by HMRC.
Essentially the rule is that if you end up with two properties after all the transactions have been finalised, then you will have to pay the new stamp duty on property charges.
What should potential landlords do?
The future isn’t looking that rosy for prospective buy-to-letters at the minute. In last year’s July budget, the government removed the Landlord’s tax relief, which, when it comes into being in 2020 will potentially force some landlords to pay tax during zero income times or while suffering losses on their property. This is as well as a raft of other smaller issues such as not renewing the Landlords Energy Saving allowance. Actually, in the last four years, landlords have been hit by 14 tax changes that have made it harder to get on the buy-to-let ladder.
This could mean that if you’re sitting in a property now, thinking about renting it out and moving to another, it might not seem the lucrative idea that it once was a year ago. It may actually be more sensible to sell your old property, purchase a new home and avoid the extra stamp duty on property charges altogether.
What about second/holiday home buyers?
You’ll be stung with the 3% surcharge even if you have a holiday home outside of the UK already, and you want to buy a place in the UK. So it could mean that a lot of UK homeowners will sell their properties abroad so they can keep ahead of the stamp duty charges. Any second residential home owner (unless you own a substantial amount of properties) will be affected by the 3% slab tax.
For the housing market this could mean quite a few changes over the next few months with the once-healthy buy-to-let and second home purchase markets seeing a downturn. For first property owners this could be great news with more homes becoming available in your area. But for potential investors, landlords and second home owners, you might want to wait to see what happens.
If you’ve decided to sell or are going ahead with purchasing a second home despite the tax hike, we’ve got storage in Oxford and removals solutions to help make things easier during these tricky times. Just contact us, we’ll be happy to help.We are always happy to hear from you if you have any questions →