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Changes to Stamp Duty Land Tax Rates for Additional Residential Properties

Are you dealing with Investment Property?
On the 1st April 2016 the Government introduced a higher rate of Stamp Duty Land Tax for second (or third or fourth etc) properties in England, Wales and Northern Ireland. Clients wishing to purchase property in addition to their main residence will be liable to pay a 3% higher rate of Stamp Duty. This will affect purchasers of all additional properties, such as buy-to-let properties and second homes. The higher rates will also apply to purchases of residential property by companies.

How is it calculated?
Stamp Duty is calculated on the purchase price of all properties over £40,000, using the scale below -

For example, if you wished to purchase a house for £200,000 and you will only be owning one property, you would be liable to pay Stamp Duty at the rate of 0% for the first 125k, and then 2% of the remaining 75k, making a total of £1,500. A buyer who already owns other properties will be liable to pay at the rate of 3% on the first 125k (£3,750) and 5% on the remaining 75k (£3,750) totalling £7,500.

Will I be subject to the higher rate?
If you are a first time buyer, or your purchase is the only property you will own, the transaction will not be affected by the changes.
If you already own property, it may be difficult to determine if you would be subject to the higher rate of Stamp Duty. In many cases, you may be buying and selling your home simultaneously. In this case, you will still only own one property at the end of the day of completion, and so will not be liable for the higher rate.

What if I am not buying and selling simultaneously?
If you intend to use your new purchase as your main residence, and are intending to sell your current property in the future, you will be required to pay the higher rate. However, you then have 3 years to claim a refund for the difference between the rates when you sell your former residence.

Married couples and civil partners may own one main residence between them for the purpose of the higher rates. Therefore, an individual buying a property may be liable for the higher rates if his or her spouse or civil partner has an existing residential property. If the spouse or civil partner then sells that residential property they may be able to claim a refund.

How can Bright help?
The changes may seem confusing. Bright Solicitors can advise on all aspects of purchasing properties, and would be more than happy to discuss your Stamp Duty liability. Should you have any further questions please contact a member of the Residential Property team or New Homes team.