Stamp Duty Land Tax: The Changes in 2016 and How They Affect You

The government has put in place an increase in stamp duty land tax (SDLT) for homeowners buying a second property that has come into effect from April 2016. The goal of this is to make more housing available for buyers and these changes could result in a hefty surcharge for some landlords making buy-to-let purchases.

To help keep all of you up to date we’ve put together an overview of the changes explaining exactly what they are, how they affect you and how to calculate the increase for any potential purchases.

What is stamp duty land tax? Stamp duty land tax is a lump-sum tax that applies to a purchase of a property or land costing more than a set amount. This tax applies when you buy a freehold property, a new or existing leasehold, a property through a shared ownership scheme or when you are transferred land or property in exchange for payment. This lump-sum can vary as it is based on the price and type of the property.

What are the changes coming in 2016? Currently the residential Stamp Duty Land Tax rate for property in the £0 - £125k band is 0%. However, any buyers purchasing additional properties in England, Wales and Northern Ireland will have to pay an additional 3% on each stamp duty band. This would mean that from April, a property bought for £100k would also come with an extra £3,000 in SDLT.

There are some exemptions from this increase such as If you are a landlord with a large portfolio and own fifteen properties or more, these changes will not apply to your purchase.

If you have purchased a second property that will not complete until after April you may still avoid the increased charges. If you exchanged contracts before November 25th- when the autumn statement from the government was delivered- you will NOT have to pay the higher tax rate.

Calculating your SDLT rate To make it easy for you to calculate the SDLT rate on any potential new purchases we’ve included a table below detailing the changes for each stamp duty band.

Band	Existing residential SDLT rates	New additional property SDLT rates
£0 - £125k	0%	3%
£125k - £250k	2%	5%
£250k - £925k	5%	8%
£925k - £1.5m	10%	13%
£1.5m +	12%	15%

It is worth noting that if the property is valued in one of the higher tax bands, the charges will apply across all bands. If you were to buy a property for £750,000 you would you pay 3% (£3,750) stamp duty on the first £125,000, then 5% (£6,250) on £125,000 to £250,000 and 8% (£40,000) above £250,000 making a total of £50,000 in SDLT.

You can find out the exact stamp duty by using the SDLT calculator on the www.gov.uk website by clicking here Our advice – act now!If you are looking to buy a second home or a buy to let investment there are considerable savings to be had if you act now. Also if you are considering placing your property on the market, then it would be advantageous to act now rather than later.

We have years of experience in the property market – so If you would like to find out more information on SLDT you should contact us today!