What do the Stamp Duty Land Tax changes mean if I’m a landlord?

If you own a second home or rent out a property, you’re bound to have heard of the changes to Stamp Duty Land Tax (SDLT).

From April 2016, the new rules mean you’ll be charged a 3% surcharge on each existing stamp duty band. This applies to the purchase of additional properties valued over £40,000.

You won’t have to pay the higher rates if you purchase caravans, mobile homes or houseboats. You’ll also be exempt from the changes if you are a corporate property developer.

There are lots of different caveats to the rules, which can seem confusing and difficult to navigate. To help, we’ve created this handy guide.

How much will I have to pay?

Probably the number one question you’ll have as a landlord is how hard the changes will hit you in the pocket. Here’s how you will be affected:

Stamp Duty

How the rates apply in practice

Purchasing a second property as a buy-to-let

You own a main residence and purchase a second property as a buy-to-let. At the end of the transaction you own two properties but have not replaced your main residence, so the higher rates will apply.

You own a main residence and a second home

If you own a main residence and a second home, and decide to sell your main residence and replace with another main residence, the higher rates will not apply. This is because it is the main residence that has been replaced.

Buying a second home as a main residence

Should you purchase a second home to be used as your main residence, and rent out your original main residence, the higher rates will apply.

Buying a property in your spouse’s name

Under the rules, married couples or civil partners will be treated as one unit. This means that any property owned by either party will be included when the stamp duty bill is worked out. Again, you’ll be able to claim back a refund if the old property is sold within 18 months.

The system will also be the same for joint purchasers, so cohabitees will still be subjected to the same rules.

Buying a property for children to live in

If you purchase a house for your children, you will be charged the additional rate if your name appears on the deed. To avoid this, you will need to buy the home in your child’s name outright.

Buying a property if you own a home abroad

Even if you are purchasing your first or only property in England, Wales or Northern Ireland, you may still have to pay the higher rate if you already own a home abroad. This applies if you are a foreign homeowner, you have a holiday home, or if you own a property in Scotland.

Changes to SDLT and Capital Gains Tax payments

Under the current system, you have 30 days from the date of purchase to pay your Stamp Duty tax to HMRC. This will reduce to 14 days in 2017.

Meanwhile, the deadline to make Capital Gains Tax payments on the sale of residential property will reduce to 30 days from 2019.

Need more help?

We hope this guide has helped you understand the Stamp Duty changes and how you will be affected. If you want a bit more information, ClearSky Business can help.

Our dedicated team of tax experts is on hand to suggest the right solution to suit your circumstances, so you know you’re getting the best advice tailored to your needs.

We don’t just help with Stamp Duty either. Our team can also assist with all aspects of tax planning, such as self-assessment and Inheritance Tax.

We’ll proactively search for the most tax-efficient ways to run your business, so you can make the most of your hard-earned money.

To get in touch with our experts, please call 08000 149 597 or email info@clearskybusiness.co.uk.

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