Stamp Duty | What’s changing?

Sep 26th '16

  • Anyone who buys additional residential property, including second homes and buy-to-lets, will have to pay an extra 3 percentage points in stamp duty from April 1, 2016.
  • The additional charge applies above the current “stamp duty land tax” rates. This means there will be 3pc tax (currently zero) to pay on homes worth up to £125,000, 5pc tax (instead of 2pc) on homes that cost between £125,001 and £250,000, and 8pc (currently 5pc) on homes worth between £250,001 and £925,000.
  • Homes worth up to £1.5m will be subject to 13pc stamp duty and those over this amount will incur a 15pc charge.
  • In practice this means that someone buying a £450,000 house will have to pay an extra £13,500 of tax.
  • Anyone buying a second home has 36 months to sell their original property. They can then get a refund on the extra tax.
  • In addition, anyone who sold their home before November 2015 but does not currently own their own home has until November 2018 to buy a new one without paying the extra tax.


What’s the difference between stamp duty and capital gains tax?

The rules for capital gains tax are different. Capital gains tax is paid on any uplift in value in a property in the time you’ve owned it.


It is not payable on a person’s private residence – another, different definition from your main home.


It’s different to the stamp duty definition, partly because you get some choice. If you own two homes, you can nominate which one of them you want to be treated as the main residence.


You can also treat a house as your principal private residence when you’re not actually living there.


You’re allowed to live elsewhere for up to three years, for any reason, and still claim the relief, as long it’s the only house you own that could be nominated (i.e. you’re not spending the time living in another house you own), and you live in it both before and after this absence.


This allowance is extended to four years if you or your spouse have to live elsewhere in the country because of work, or an unlimited amount of time if you have to live abroad for work.


If you live in job-related accommodation, such as a vicarage or barracks, you can claim private residence relief on another property you own which you are intending to use as your main home, even if you never actually live there.


If at the end of the day of the transaction you own more than one property, and you have not replaced your main residence (by selling it), you have to pay the surcharge.


So, in your instance, you could end up paying second-home stamp duty on a property you intend to live in, because your current main residence is rented. But it means that once you buy it and move in, it will then become your principal private residence, exempting it from capital gains tax.


Author: Elaine Walker


Our associates offer proactive advice on tax issues. Find out more by visiting our Accountancy page, or contact us.