Stamp Duty on second homes could soon cost over five times more
PUBLISHED: 13:11 09 March 2016 | UPDATED: 13:11 09 March 2016
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Anyone looking to buy a second home, residential buy-to-let or residential investment property must complete their purchase by midnight on the 31st March or they could face paying more than five times the current rate of stamp duty land tax (SDLT), warns the Cheltenham office of accountancy, investment management and tax group, Smith & Williamson.
This applies to most second homes or residential investment property purchases unless contracts were exchanged on or before 25 November 2015.
Krista Woodman, director and head of private client tax services at Smith & Williamson’s Cheltenham office, said: “The timing of this tax hike might appear unusual for individuals used to tax changes which normally take effect from the start of the tax year on the 6th April, but the Chancellor has named the 1st April as the date from which these new rates will apply. Missing the date by just one day could cost thousands of pounds and I fear many people could inadvertently miss out. Confirmation of how the new rules will apply is expected in the Budget on 16th March – potentially just days before the new charges are introduced.”
Currently, the average cost of a property in the South West is £196,134.00*. If a property was bought for this price before midnight on the 31stMarch, then SDLT of £1,422.68** will be due. If, however, the same property was purchased just a day later, the SDLT on second homes or residential investment properties in this price bracket will increase to £7,306.70.
SDLT is paid on property when the purchase is completed. It is calculated according to the purchase price. If buying residential leasehold property you pay SDLT on the purchase price of the lease using the rates below.
SDLT generated £10.7bn for the Exchequer during 2014-15 according to the statistics from HMRC (issued January 2016).
Using 1st April as the date from when the new SDLT rates will apply coincides with the timing of a number of other changes in business taxes.
*The Land Registry’s figures, published January 2016
** SDLT charged at 0% on the first £125,000 and at 2% on the value from £125,001 - £196,134.00. Further details are provided in table below.
Smith & Williamson is an independently owned professional and financial services group with over 1,500 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-to-large corporates. The group has thirteen offices; these are in London, Belfast, Birmingham, Bristol, Cheltenham, Dublin (City and Sandyford), Glasgow, Guildford, Jersey, Manchester, Salisbury and Southampton.