Stopwatch for Stamp Duty

Posted 6 January 2016 by Neil Moore

Stamp Duty (SDLT) is a tax imposed by the Government when you buy a property or land over a certain price in England, Wales and Northern Ireland.

There have been two major changes to Stamp Duty over the last year, with the second coming into effect in April 2016. For the majority of buyers, the changes in April 2015 have been a benefit, with most buyers paying less Stamp Duty (the balance tips for purchases over £1,000,000).  With the new changes from April 2016, most Buy To Let (BTL) investors and second home owners, will pay an additional surcharge (a further 3% tax) on the total value of the purchase.

So, as an example, if you are selling your home for £300,000, under the old Stamp Duty rules (pre-April 2015) your buyer would pay £9000. If they were buying this house today (between April 2015 and April 2016) SDLT would be £5000, saving £4000. But, if they are buying to rent it out and buy after April 2016 they will pay an additional £9000, making a total SDLT payment of £14,000.

This could mean a change in the value of your property in April 2016. Many investors who are thinking of buying a second home, for themselves or for investment, will want to buy now, to ensure they complete the purchase in good time for the April 2016 SDLT change.

Indeed, mortgage brokers are currently warning that Buy to Let mortgage applications need to be submitted prior to 29 January to ensure that purchases can complete prior to the changes coming in. One broker has advised that as an industry average it takes 95 days to take a case from start to completion – as of today, there are only 86 days until the new charges take effect. Cases can be completed in this timeframe but it is going to take careful monitoring and chasing by parties to ensure purchases are successful within the deadline.

Even if your property is not directly affected, perhaps because it is not a suited as a BTL investment, it may be indirectly affected by the changes. If you are moving over the next few months, there are likely to be BTL buyers involved in your property sales chain. They have some very important deadlines to meet i.e. before 6 April 2016 and this will help get the whole market moving, from the bottom up. 

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