On 25th November 2015, the Chancellor George Osbourne announced that from 1st April 2016 higher rates of SDLT (Stamp Duty Land Tax) will be charged on the purchase of additional residential properties above £40,000.
This will include buy to let properties, second homes and holiday homes. There are exceptions to this rule, with the higher rate not applying to purchasers of caravans, mobile homes and houseboats, or to corporate or funds making significant investments in residential property (given the role of this investment in supporting the government’s housing agenda). It should be noted however that the government is to consult on the policy detail, including whether an exemption for corporate and funds owning more than 15 properties is appropriate.
The government have indicated that they will use some of the additional tax collected to provide £60 million for communities in England, where the impact of those owning second homes has a particular detrimental effect on the ability of first time buyers to get on the housing ladder.
As a practical example to highlight the significance of the changes, if an investment or second home was purchased at £250,000, the stamp duty will rise from £2,500 to £8,800 from the 1st April 2016. It should also be noted that these changes will apply to purchase completions from 1st April 2016, irrespective of whether the exchange of contracts occurred prior to the date that the changes were announced.
As a result of these changes, many expect a surge in buy to let and second home purchases prior to April 2016, with others fearing the impact on the private rental sector. It will be interesting to see to what extent these changes will affect the housing market over the coming months.
To discuss how the potential changes might affect you, or for assistance in any property related matters before the changes come into effect, please contact Joe Da Silva on 01494 478665 or firstname.lastname@example.org.