Your Stamp Duty FAQs

Your Stamp Duty FAQs
Here, we bring you a basic FAQ for the upcoming stamp duty changes. Firstly, we take a look at what charges you can expect to pay once the legislation goes live on 1 April 2016.

How much stamp duty can I expect to pay?

Stamp Duty works at different percentage points for every incremental increase in the values of a property.

Stamp Duty Table 1
Below, you can see the significant difference in expected costs from an owner-occupier compared with a second property/buy-to-let.

 Stamp Duty Table 2
Because of the increased charge, first-time buyers may find themselves in a slightly better position to secure property at the first stage. However, it must be said that a buy-to-let will probably earn you more in rental income and capital gains than you would ever lose on a stamp duty surcharge. If you plan on investing in property for the long-term, you will easily offset the cost of the stamp duty. For example, on a property worth £175,000, you will pay 3% on the first £125,000 (£3,750) and 5% on the remaining £50,000 (£2.500). Therefore, you will pay £6,250 stamp duty on your property, at a total cost of £181,250.  

I am buying and then immediately selling. Am I subject to the tax changes?

If the day of the transaction ends up with you legally owning one property, you won't have to pay the extra stamp duty. If you end up with two or more properties, things get more complicated:
  • If the new property will become your main residence (and the old one will be sold), NO
  • New property becomes main residence, old one sold within 18 months, YES, but refundable
  • New property does not become main residence, YES

I will own two properties, but not for long. I plan on selling the old property. Do I have to pay extra?

Yes. But fear not. The money is refundable as long as you sell your old property within 18 months of buying the new one - so, plenty of time. If you, the buyer, will own two properties at the end of the same day that you buy the new property you have to pay the higher rate. Therefore, if you sell your current property before finalising the deal on the new one, you will automatically be exempt from the higher rate.

I have a rental property already. Will I pay the higher rate if I move from my primary residence?

If you are keeping your rental property, but are selling your main residence to upsize/downsize, then you won't have to pay the surcharge. This is because you are buying a home to live in.

We're married. Can we own one property each to pay the lower rate?

No. Married couples and civil partners are to be seen as one unit. As long as either member of that unit purchases a new property without selling the current one, expect to pay the higher rate.

We're buying a joint property. One of us has bought before, but one of us hasn't. Which rate takes precedent?

The higher rate - one of the parties will own two properties at the end of the day of transaction. However, the government has discussed alternatives to make the set-up less punitive to the first-time buyer.

Can we help our children buy?

If you outright buy a second property with your child in mind, you will have to pay the higher rate. You can take out a joint mortgage with your child, but as you are part of the deed, it will count as a second property, therefore subject to the new rates. You could instead put yourself down as a guarantor on your child's mortgage (if that service is offered), which will not make you liable. Another option is to give your child the money for a deposit - leaving your child, the first-time buyer, to avoid the higher rate.

What if I've already exchanged contracts?

If you exchanged contracts by November 25, 2015 - the date of the announcement - you will not have to pay the higher tax rate, even if you complete the deal after 1 April 2016, when the tax is due to go live. If you exchanged after that date, you will be expected to pay the higher rate, as you should have been aware of it.

Can I claim back the cost from my CGT bill?

As the rules currently stand, yes. Investors are able to claim back stamp duty and other purchasing costs from the sale price, possibly reducing their capital gains on the property in the future.

Martin & Co is a lettings specialist with 30 years' experience in the private rental sector. If you have plans on beating the rush and saving yourself some money on your next investment, please contact your local Martin & Co office today.