… on second homes?
It is just a matter of weeks until the rules regarding Stamp Duty Land Tax (SDLT) change for second home owners, including buy-to-let investors. In recent years, UK property owners have been reaping the rewards of the current SDLT system, however from April 2016, the new rules are expected to affect 10% of residential property purchases, unfortunately for the worse.
Who has to pay the extra 3%?
The extra 3% will be charged on all property purchases completed on or after 1 April 2016, where the buyer owns, or partly owns, two or more residential properties.
The additional SDLT applies to the value of the property as a whole.
For example, a property valued at £250,00 would be liable for £2,500 SDLT for a primary residence. This is calculated as £250,000 less the £125,000 tax-free bracket, multiplied by 2%. For a secondary residence, the extra SDLT would be applied to the entire property value of £250,000 at 3%, resulting in an additional £7,500 in tax.
Exceptions to the rules
There are a number of exceptions to these rules. Initially, if a property has exchanged contracts prior to the announcement of the new regulations on 25 November 2015, yet the transaction doesn’t “complete” until after the 1 April 2016, then the extra SDLT will not become due.
Additional SDLT is void if:
- The property is valued at under £40,000
- The property is not 100% residential – i.e. part retail with a flat above, purchased in one transaction
- The property is replacing a main residence that has been sold
- The transaction is a bulk acquisition of more than 15 properties (possibly only available for corporate buyers)
18 month window to claim a refund
Where a second home is purchased and the current main residence isn’t sold, there is a period of 18 months to sell the initial main residence, and claim a refund of the SDLT paid on the new property.
After the 18 month window of opportunity, there are no grounds for a refund.
Dental & Medical Financial Services can help explain the rules further and relate it to your personal circumstances. Call today to speak with a specialist adviser.
Tel: 01403 780 770