If you are buying a second home, have you budgeted for higher rate stamp duty?
Putting money into bricks and mortar has long been seen as a safe investment and has resulted in large numbers of people investing in second properties.
If you are considering such a move, then you will most likely be busy factoring in all the costs involved - but have you remembered the 2015 Autumn budget statement that introduced an extra stamp duty charge for those purchasing more than one property?
You may be considering a personal holiday home or a work-based flat or apartment, a buy-to-let investment property or even a purchase for a family member. Relationships are more diverse than ever before too, and you may be buying a home with a new partner, whilst holding on to a property you already own. If this is the case, you may be inadvertently caught by additional rates of stamp duty.
At the point when you decide to instruct a solicitor on a second home purchase, they should enquire as to your current property portfolio and ensure you are aware of the extra cost, which is an additional three per cent of Stamp Duty Land Tax (SDLT). It applies on any property over the selling price of £40,000 with the only possible exception being a holiday home that is let out for part of the year and is regarded as a business.
So, to give you an idea, on a second purchase worth £80,000 the SDLT will be £2,400. At the other end of the scale, if the second home is being purchased for £500,000 then the charge increases to £30,000. Such SDLT will be payable upon completion of your matter.
There are reliefs available in certain circumstances that enable you to claim a refund of the additional element of the stamp duty which you paid on your purchase if you sell your previously-owned property, which was occupied as your sole or main residence within three years of the date of completion of your purchase.
In making the changes, the Government stated its commitment to supporting home ownership and first-time buyers. In fact, first-time buyers are in a far more favourable position with the introduction of no SDLT on first-purchase properties up to a value of £300,000, which is a stark contrast to a second home buyer who would have to pay £14,000 on a property with a value of £300,000.
While the additional SDLT costs should not necessarily deter a would-be second home purchaser, it can be a significant additional cost that should be factored in at the outset to enable you to consider the true cost of such a purchase.
For more information and advice on all aspects of domestic property purchase, please contact Laura Hyam: Laura.Hyam@wilkinchapman.co.uk