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Stamp Duty changes

A new rate of Stamp Duty Land Tax is now in force. Property lawyer Claire Simmons looks at the potential impact on buyers of additional homes.

From 1st April 2016, if you are buying a new residential property and it means you will own more than one, you will now usually have to pay 3% on top of the normal Stamp Duty Land Tax (SDLT) rates for buying an additional residential property for £40,000 or more in England, Wales and Northern Ireland.

HMRC have an online SDLT calculator which you can use to work out how much tax you’ll pay.

If you have exchanged contracts on the purchase of your property prior to 26th November 2015, then you may not have to pay the higher rates.

The new rate will not apply if you are replacing your main residence. For example, if the property you are buying is replacing your main residence and this has already been sold.

If there’s a delay in you selling your main residence and it hasn’t been sold on the day you complete your new purchase, then you will have to pay higher rates because you own two properties. However, you may get a refund if you sell your previous main home within 36 months.

You will also pay the higher rate if you buy a residential property in England, Wales or Northern Ireland and you already own one outside these countries.

If you are purchasing any properties jointly with other people and any of them already own one or more properties, you’ll need to pay the higher rates. If you’re married or in a civil partnership, buying a property and your spouse or civil partner already owns a property you may still be liable to the higher rates. However, you may be able claim a refund if they then go on to sell it within 36 months.

The Government has decided that when applying the higher rates, a small share (50% or less) in a single property which has been inherited within the 36 months prior to the transaction will not be considered as an additional property. This is intended to provide flexibility for purchasers who may find it difficult to dispose of a share in a property quickly.

If your additional home is a caravan, mobile home or houseboat, the new rules will not apply.

There are different SDLT rules and rates for corporate bodies, people buying six or more residential properties in one transaction, shared ownership, multiple purchases or transfers between the same buyer and seller, and companies and trusts buying residential property.

For more details on how the changes may affect your situation, you should consult an independent financial adviser.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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