16th February 2016
A leading accountant has warned property investors that the stamp duty land tax hike on second properties comes into force on 1st April not at the start of the new tax year on 6th April.
Smith & Williamson director Chris Springett points out that missing the deadline by a day will attract stamp duty on the average property price of £188,270 of £5,648, more than four times the amount payable the day before.
The firm says anyone looking to buy a second home, residential buy-to-let, or investment property before the proposed increases in SDLT are introduced, should note midnight on 31 March 2016 as the time and date by which they must complete their purchase. This applies unless contracts were exchanged on or before 25 November 2015.
Springett says: “The timing of this tax hike might appear unusual for individuals used to tax changes which normally take effect from the start of the tax year, 6th April, but the Chancellor has named the 1st April as the date from which the new rates will apply. Missing the date by a few days could cost thousands of pounds and I fear many people could inadvertently miss out.”
Currently, the average cost of a property in England & Wales is £188,270 so the SDLT charge, if making that acquisition on or before 31 March 2016, is £1,265. This rises to £5,648 in April.
The average cost of a property in the South East is £261,581, giving rise to SDLT at £3,079 right now, but costing £10,926 if bought as a second home from April 1st.
With the average cost of a property in London, at £514,097* the amount of SDLT you would pay before the changes take effect would be £15,704. But the new rate, effective from 1st April would mean a £31,127 SDLT charge.
Springett adds: “The changes are due to apply from April Fool’s Day, so anyone seeking to buy a second home, buy-to-let or residential investment property should keep this in mind!”
Confirmation of how the new rules will apply is expected in the Budget on 16th March – potentially just days before the new charges kick in.
SDLT generated £10.7bn for the Exchequer during 2014-15 according to the statistics from HMRC (issued January 2016).
|Stamp duty land tax on purchase of residential property.|
|Brackets||Standard rate||Second home rate (due to apply from 1 April 2016)|
|Applies until 31.3.16|
|Up to £125,000||0%||3%|
|£125,001 – £250,000||2%||5%|
|£250,001 – £925,000||5%||8%|
|£925,001 – £1.5m||10%||13%|
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