If you already own a property and are thinking of buying another one then you need to act quickly to avoid paying an extra 3% in Stamp Duty Land Tax. (SDLT)
George Osborne announced his intention in the Autumn Statement on Wednesday 25 November to charge an extra 3% Stamp Duty on individuals and limited companies that are purchasing another residential property.
The extra charge applies to any property costing more than £40,000 to be used as say a main residence, second or holiday home, buy to let, or property purchased for a relative such as your son, daughter or elderly relative. If you already own a property at completion then the additional tax applies to you.
The new changes apply from 1 April 2016.
The new charge does not apply to purchases of caravans, mobile homes or houseboats.
The details on how this will work in practice is sketchy at the moment and the Government say they will consult on the new policy in detail.
There may be an exemption for Limited Companies and investment funds owning more than 15 residential properties.
How much extra tax will I pay?
For example if you are buying a buy to let now for £200,000 you would currently pay £1,500 in SDLT; from 1 April 2016 the bill becomes £7,500.
On a second home costing £500,000 the SDLT bill is currently £15,000; this will increase to £30,000 from 1 April 2016.
What do I do?
The advice is to act now if you intend buying another property and complete on any transaction before the 1 April 2016 to avoid paying this extra tax. You have a four month window of opportunity that will close on the 1 April 2016.
SDLT is only payable on completion so just exchanging contracts is not sufficient, you will need to exchange.