What do the new Stamp Duty rules mean for me?

March 30, 2016

From Friday 1st April the government will introduce a surcharge, affecting the purchase of many properties in the UK.

Despite initially being aimed at the buy to let market, the final draft of the policy holds some nasty surprises for many contractors purchasing a home to live in, so before you set your sights on a dream home, read our Stamp Duty guide and speak to one of our specialist advisers to find out how the new rules affect you.

What are the new rules?

From the 1st April 2016 the government are introducing a new Stamp Duty levy, which will be payable when you purchase a second residential property worth more than £40,000, whether to be used as your main residence, or a buy to let.

The Stamp Duty rates for additional properties from April will be as follows:

Stamp Duty 1

Do the rules apply to Scottish property?

From the 1st April the Scottish Land and Buildings Transaction Tax (LBTT) will also change in line with the changes being introduced across the rest of the UK.

My partner is a first time buyer but I own and will be keeping my current main residence as a buy to let. Do the rules apply to me?

Yes. The new rules apply if any one party to the new purchase owns another property.

I’m selling my current home and buying a new main residence, however I already own a number of buy to lets. How will the new rules affect me?

If you are purchasing a property which will directly replace your current main residence (in other words, you’ll be selling your current home at the point of buying the new property) the 3% levy won’t apply to you, even if you own a number of buy to lets already.

I’ve already let out my former main residence and now live in rented accommodation. When I buy a new main residence, will I have to pay the surcharge?

Unfortunately, yes. The exemption mentioned above only applies where you replace your former main residence, whether you still live in that property or not. You could consider transferring the property to a spouse or partner and purchase the new property in your sole name to escape the surcharge, however we’d advise you speak to a mortgage adviser and solicitor before doing so to fully understand the implications of doing this.

What happens if I want to sell my current main residence shortly after purchasing a new home?

This is extremely common amongst contractors and thankfully there is a grace period offered in these circumstances.

You will still need to pay the Stamp Duty surcharge initially, however this will be refunded in full provided you sell your previous main residence within 36 months of purchasing your new home.

Do I have to pay the surcharge if I purchase a property through a limited company?

The new levy applies to any property purchased through a corporate structure so you would have to pay the additional 3% should you use a company to purchase the property.

There are, however, other benefits to purchasing through a company and if that’s something you’re considering we’d recommend seeking independent mortgage and tax advice in the first instance.

Are there any exceptions to these rules?

There are some minor exemptions as follows:

  • If your new property costs less than £40,000 you won’t pay the surcharge
  • If you inherit a property, there is no Stamp Duty payable
  • If you are legally separated and have been removed from the deeds of your former home

When will I have to pay the additional Stamp Duty?

Your solicitor will pay HMRC on your behalf when the new mortgage completes. Usually, these funds are required when you exchange contracts and legally commit to buy the house.

How do I calculate the amount of Stamp Duty I need to pay?

Stamp Duty is now marginal, meaning that you’ll pay the rates above for the portion of the purchase price within that tax bracket.

As an example, if you purchase a property for £400,000 you’ll pay the following rates:

Stamp Duty