In the 2015 Autumn Statement, the Chancellor George Osborne announced new measures that will affect anyone purchasing an additional property, including Buy-to-Let landlords and those buying second homes.
From April 2016 Buy-to-Let landlords and people buying second or holiday homes will have to pay a 3% surcharge on top of current stamp duty rates.
This new second home and Buy-to-Let stamp duty is tiered. Each tier, or portion of the property price, will be subject to an extra 3% stamp duty on top of the usual rate paid by those buying a home to live in.
The good news is that if the total price of the property is below £40,000 you won’t have to pay any stamp duty. For example if you were to buy a caravan, a mobile home or a houseboat, with a total price of less than £40,000 you’ll be exempt from the higher transaction fees.
The table below shows a comparison between the current and the new rate of Stamp Duty
Portion of property price Current stamp duty rate New stamp duty rate
£0-£40,000 0% 0%
£0-£125,000 0% 3%
£125,001-£250,000 2% 5%
£250,001-£925,000 5% 8%
£925,001-£1.5m 10% 13%
£1.5m+ 12% 15%
So, how does this work? Let’s look at an example of a property costing £300,000:
- Portion 1: £0 – £125,000 – 3% tax (£3,750)
- Portion 2: £125,000.01 – £250,000 – 5% tax (£6,250)
- Portion 3: £250,000.01 – £300,000 – 8% tax (£4,000)
- Total tax paid: £3,750 +£6,250 +£4,000 = £14,000
- Total paid for property: £300,000 + £14,000 = £314,000
The new stamp duty rates will obviously have a huge impact on people who are considering a buy to let property, and they will need to consider carefully the cost of the property against the potential income.
For friendly and down to earth advice on stamp duty and any part of the conveyancing process, get in touch with a member of the Peter Robinson & Co. team today.
Call us now on 0161 678 7996.