Changes to SDLT for Buy to Let

11/12/2015

George Osborne has announced an unexpected new tax on private landlords and second home buyers in his Autumn Statement 2015.
 From 1st April 2016 a higher rate of stamp duty will be levied in addition to existing stamp duty land tax for private purchasers of buy to let properties and private purchasers of second homes. The additional tax is expected to raise an additional billion pounds for the treasury by 2021 which George Osborne said would be reinvested in local communities to enable first time buyers to purchase affordable homes.

The current rates and new rates of SDLT for additional residential property purchases are:

BandExisting SDLT ratesNew additional SDLT rates
*£0 – £125k0%3%
£125k – £250k2%5%
£250k – £925k5%8%
£925k – £1.5m10%13%
£1.5m +12%15%

*Only applies to purchases over £40,000. For purchases at £40,000 or under no SDLT return is required.

HMRC has confirmed to The Law Society that the charges will apply to all completions that take place on or after 1 April 2016 but contracts that have been entered into on or before 25 November 2015 with a completion date on or after 1 April 2016 will not be subject to the new rates. Any contract entered into after 25 November 2015 with a completion on or after 1 April 2016 will be affected.  The Law Society is awaiting a response from HMRC as to the impact which the extra SDLT rate is likely to have on multiple-dwelling relief.  This change to the stamp duty rates follows another recent change in the SDLT rules which came into effect overnight on 4 December 2014 whereby the % rate of SDLT was significantly reduced.  Prior to the December rate change a flat % rate was applied to the whole of the purchase price.  For example a £275,000 property purchased prior to the rule change in December 2014 was subject to SDLT at a flat rate of 3% so that the total SDLT due was £8,250.  Following the rule change in December % rates were charged according to property price bands.  For example a £275,000 property purchased today is subject to the new SDLT rules and SDLT is charged at 0% for the first £125,000, 2% above £ 125,000 and up to £250,000 and 5% above £250,000 and up to £925,000 making the total SDLT due today significantly lower at £3,750.  The further change to the SDLT rules will result in an additional 3% SDLT payable on the purchase price of a buy to let or second home between £125,000 and up to £250,000 and an additional 5% on the part of the purchase price between £250,000 and up to £925,000 making a total due for SDLT after 1st April 2016 a whopping £12,000.   

The higher rates will not apply to corporate bodies or to funds making significant investments in residential property.  A consultation is expected on the policy detail which will include whether it is appropriate to have exemptions for corporates and funds owning more than 15 residential properties. 

So will there be a surge in buy to let and second home house purchases before 1st April 2016 or a surge in incorporations if private landlords move to the corporation tax regime for property investment? Only time will tell. However, if you are considering a buy to let or second home purchase please contact Keeley Miller in our Commercial Property Department for advice on 01708 229444 or email keeley.miller@pinneytalfourd.co.uk

This article was written by Keeley Miller in our Commercial Property Department at Pinney Talfourd Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at December 2015.

11/12/2015

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