How much is my home worth?
To sell To rent
Rebecca Overton
Written by Rebecca Overton 26th April 2016

Caveat emptor: buyers – and landlords – beware, part 1

Domestic landlords are paddling on a sea of change just now. At the start of the month, two new laws came into force that could end up snipping away at the profits of those who own and/or let out second homes.

In this, the first in a two-part series of blogs on how these changes might affect you, we give you the lowdown on the new stamp duty legislation that means you’ll be more heavily taxed on the purchase of a second property.

 

Stamp duty on additional property

From 1 April changes to the stamp duty land tax (SDLT) system will mean in most cases, if you buy a residential property and that purchase results in you owning more than one, you’ll have to pay an extra 3 per cent on top of the normal stamp duty rates1.

As any homeowner will know, stamp duty is payable on incremental portions of a residential property over £125,000. The additional charge levied on second and buy-to-let homes will apply to each existing stamp duty band, as the table shows:

Bracket Standard STLT rate Additional property
1. Up to £125k 0 per cent 3 per cent
2. £125,001 - £250k 2 per cent 5 per cent
3. £250,001 - £925k 5 per cent 8 per cent
4. £925,001 - £1.5m 10 per cent 13 per cent
5. £1.5m+ 12 per cent 15 per cent

Here’s an example. Mr Smith owns his home and has just purchased a second property for £565,000 that he intends to let out. His stamp duty charge is calculated as follows:

  • 3 per cent on £125,000 = £3,750
  • 5 per cent on £124,999 (bracket 2) = £6,249.95
  • 8 per cent on £314,999 (bracket 3, up to the purchase price of £565,000) = £25,199.92

Mr Smith will pay a total of £35,199.87

But, reliefs and exemptions are available, for example, for multiple dwellings or when property is transferred in a divorce or dissolution of a civil partnership. In addition, parties can agree to take off the cost of removable fixtures and fittings – known as chattels – to be left behind in the property from the price. This could reduce the amount of stamp duty payable, since it only applies to the purchase of the land.

You can find out more about reliefs and exemptions here.

In part two, we set you up with all you need to know about new energy efficiency standards.

 

Sources

  1. https://www.gov.uk/stamp-duty-land-tax/residential-property-rates