Trust Beneficiaries: Should They Be Concerned About The New Stamp Duty Rules?

Year Published: 2016

From 1 April 2016 anyone who buys a second home will be hit by the controversial extra 3% stamp duty charge.

For example, anyone buying a £200,000 second home or buy-to-let property before April will pay a stamp duty tax of £1,500. The calculation of this is based on paying:

  • 0% tax on the first £125,000 of the property value; and
  • 2% tax on the portion between £125,001 and £250,000.

However, from 1 April 2016 second home buyers will have to pay:

  • 3% tax for the first £125,000; and
  • 5% tax on the amount between £125,001 and £250,000, instead of the previous 2% on this portion.

This gives them a total bill, for stamp duty, of £7,500 when purchasing a second property worth £200,000.

So in this example, someone buying a second home would end up paying five times more than someone with just one property.

Who will be affected by the new stamp duty rules?

  • Landlords;
  • Parents buying a property for their children;
  • A couple purchasing a home together, where one is already a homeowner;
  • In the case of a Trust, a beneficiary who has a life interest in a property and is already a property owner. The Trust may not have the funds to pay the additional charges and result in the beneficiary paying the bill.
Helen Kelly, Partner and Head of Trusts at SAS Daniels Stockport

Helen Kelly, Partner

An exception applies to properties which are bought to replace the main residence, provided the original main residence has been sold. In other words, if you only own one property and are simply selling that and purchasing another.

If you keep your old home at the time of completion you will need to pay the extra stamp duty charges, even if you move into a new main residence. If this is the case you could get a refund on the stamp duty, if you sell your old property within 18 months. Although, it is not exactly clear what the definition of “main residence” will be.

What is clear is that if a person lives in rented accommodation and buys a residential property as an investment, the surcharge will not apply.

For more information on how the new stamp duty rules could affect you as the beneficiary of a Trust or any other matters regarding a Trust, please contact Helen Kelly in our Trusts team on 0161 475 7685.

You can also read more about the new stamp duty rules and figures in our recent property blog, ‘Stamp Duty Changes for Additional Residential Properties: Attention All Landlords’, view the blog here.

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