Everything You Need to Know About Stamp Duty in 2016
If there is one thing that is sure to change every year it’s the rules relating to stamp duty. This year is no exception. Stamp duty is a tax on the value of property, payable whenever making a purchase. Usual budgetary changes to stamp duty normally involve raising or lowering the thresholds. This year however, the changes are slightly different.
The new changes took effect on 01 April and look set to radically alter the buy-to-let market. Purchasing a second property will now incur an extra 3% fee on top of current thresholds. This tax aims to reduce the amount of landlords owning multiple properties thus freeing homes up to be sold to first time buyers and homeowners attempting to move up the property ladder.
Under the proposed changes 3% will be added to these rates so long as it is a second home and over the £40,000 threshold.
A £200,000 home would normally be liable for a 2% rate which would be £1,500. The first £125,000 is tax free with 2% payable on any amount up to £250,000.
If making a second home purchase or a buy-to-let, you’d pay 3% up to £125,000 and 5% on the remaining amount. This would raise the total payable amount to £7,500.
There are several ways that the extra stamp duty can be avoided. Buying a second home that is intended to be the main residence means it won’t be collected or can be refunded if the former residence was sold with 36 months.
Parents are often keen to buy a home for their children, this could be for university or simply to help them on to the property ladder. The home would need to be in the child’s name or as part of a trust for the child in order to avoid paying an extra 3% in stamp duty. Buying it jointly with children would leave the parents liable for the extra stamp duty on their share of the new property.
Married couples who have separated but not finalised divorce proceedings will also be exempt from the extra 3% tax.
If a foreign property is owned the new buy will be considered a second property and stamp tax will still be payable.
Some buy-to-let landlords have formed companies in order to manage all their properties. While this will still ensure they get mortgage interest relief it will not exempt them from the higher rates of stamp duty. There has even been some suggestion that this higher rate could be payable on all residential properties purchased by a commercial entity.
Has this helped you understand the stamp duty changes? If you have any more questions, feel free to ask them in the comments and we will do our best to answer them. Don’t forget, if you’re planning a new house purchase, our York removals company can help your relocation go smoothly!