Budget 2016: How Could The Changes to Stamp Duty Rates for Residential Property Affect Your Purchase?

Year Published: 2016

In November 2015 the Chancellor announced the higher stamp duty rates which would apply to additional residential property purchases from 1 April 2016 (if contracts were not exchanged before 26 November 2015). These changes were confirmed this week, in his budget statement on 16 March 2016.

Stamp Duty Land Tax or SDLT is the tax you pay when buying a residential property and as of 1 April the higher rates* will apply, if at the end of the day all of the following conditions are met:

  1. The value of the transaction is more than £40,000;
  2. The property is not subject to a lease with 21 years or more to run;
  3. The purchaser (or their spouse/civil partner) owns another interest in a residential property which has a value of more than £40,000 and is not subject to a lease with 21 years or more to run;
  4. The property being purchased is not replacing the purchasers only or main residence.

You may be thinking ‘well what if I’m married, does the new rate apply?’ or ‘what if I want to help my children, will these higher rates apply then?’ Here are our answers to help you understand the new higher rates and when they will apply.

Do the changes to stamp duty rates apply if you are married or in a civil partnership?

If you are married or in a civil partnership then your spouse or civil partner is treated as being a joint purchaser in respect of the transaction. The tests for conditions 1-4 above have to be applied to both parties circumstances.

For example, Mr and Mrs A live in a property owned by Mr A. Mrs A buys a property in her name as an investment. Although Mrs A does not own any other property the higher rates of SDLT will apply as she is part of a married couple and as a married couple all property owned by either of them is treated as being owned jointly.

Do the higher stamp duty rates apply if you buy a new property before selling your existing property?

If you purchase a property which will become your new home (new main residence) before you complete the sale of your existing home then the new higher rates of SDLT will apply to the transaction.

If you subsequently sell your previous home or main residence within three years of paying the higher SDLT rates then a refund is available but you will of course have to budget for making the higher payments initially.

What if you’re planning to help your children onto the property ladder by jointly owning a property?

If you are planning on jointly purchasing a property with your children in order to help them on to the property ladder then the new stamp duty rates will apply to you (assuming that you already own your own home.) This will of course affect budgets as if you are buying a property for £200,000 the SDLT payable (as of 1 April 2016) will be £7,500 instead of £1,500, which would have been the tax payable if you bought the property before these changes came into force.

Are you affected by the new stamp duty rates if you are a beneficiary under a Trust or a trustee?

If you are a beneficiary of a Trust which owns property then you could be treated as owning another property for the purposes of conditions 1-4 above. You can read more about how the changes can affect you as a Trust beneficiary in our Trust team’s blog: ‘Trust Beneficiaries: Should They Be Concerned About The New Stamp Duty Rules?

Who else might be affected by the higher stamp duty rate?

If you own property as part of a partnership or as a trustee then there are additional factors that will be applied to determine if you would need to pay the higher rates of SDLT.

If you are purchasing in a company name then the higher rates of SDLT will apply to all transactions of residential property.

There are also other provisions/reliefs that can be applied for multiple property purchases.

For more information as to how the changes to stamp duty rates could affect you, please contact Residential Property team on 0161 475 7676.

*You can read more about the higher rates and what the costs will be in our earlier blog: ‘Stamp Duty Changes for Additional Residential Properties: Attention All Landlords.

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