From the 1st of April 2016, property owners that invest in a second property will be required to pay the extra 3% of the purchase price in stamp duty. Properties affected by this new policy include buy-to-lets and second homes, however, commercial, semi-commercial, land and residential purchases are exempted. The additional 3% charge is applicable to current stamp duty land tax rates.
While the new regulations appear to be targeting the buy-to-let market, landlords need to be aware of certain things:
- The Treasury is becoming stricter regarding what qualifies as a main residence when it comes to paying the extra stamp duty charge. If you buy a second property, you will always be required to pay the higher rate of stamp duty, even if you intend to let to buy (live in the new property and renting out the old property).
- Property owned, anywhere around the globe, will be considered when determining if a property purchased in England, Wales or Northern Ireland is an additional property. What this means is that any landlord purchasing a first property in England, Wales or Northern Ireland will still be expected to pay the higher stamp duty rate if they own a property outside of the UK.
Affected landlords include foreign landlords buying a property in Britain, a Brit with a holiday home abroad and landlords with Scottish property.
Understandably, many landlords are doing their best to complete the purchase of a property before the new laws kick in. If you fall into this group, then you need to act fast. Purchasing processes will slow down as lenders and solicitors become inundated with more and more requests, the closer we get to the deadline. The usual property acquisition process will become drastically more delayed; possibly meaning you won’t be able to complete the purchase prior to the new laws.
The process of financing and completing a property purchase remains the same, however. Buyers must still locate an appropriate property that ticks all the right boxes, apply to a lender or broker and kick off the legal process with solicitors.
Acting now will help you complete your purchase before the April deadline.