Why the Government is making change in Stamp Duty?
The Stamp Duty rate payable on purchases of buy to let and second homes will be increasing considerably from 1st April 2016; but are you aware why the Government is making such a drastic change in the level of stamp duty payable?
From 1st April 2016 more transactions will attract stamp duty than before as the threshold is being lowered to £40,000 (from the current £125,000). That means that not only will there be an extra 3% duty payable on buy to let purchases or second homes, but there will also be a lower threshold to meet before stamp duty becomes payable. Considering that a vast majority of properties in the current market will be over £40,000, this will impact many of us.
It is not all bad news. The rise is stamp duty payable is particularly good news for first time buyers trying to get on the property ladder. When looking at a development with around 150 flats, it came to my attention that a majority of the proprietors (owners) of these flats were investors from countries like Japan, China or the Middle East. These investors are effectively raising the competition in the property market and putting first time buyers in a difficult position. The higher rates in stamp duty would mean that these investors would think twice before purchasing these developments. It is evident that once the number of buy to let purchasers drop, there will be a bigger market for the first time buyers.
Moreover, the changes in Stamp Duty rates coincide with the changes in the government schemes. There are currently a number of government schemes, such as the help to buy scheme. From April 2016, the government help to buy scheme is improving and provided that you have a deposit of 5%, the government will provide an interest free loan for the first five years of 40% of the purchase price of the property (an increase from the current 20% equity loan). This scheme and others, demonstrates the government’s campaign to help people become home owners.
It is important to bear in mind that this only affects those who are buying to let or buying a second home. If you are buying for the first time, merely changing your main residence property (i.e. selling your current property and buying another) and you are only ever in ownership of one property, then the higher rate will not affect you.
Use the link below to calculate the amount of SDLT that may be due on your purchase: https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro
For more information regarding Stamp Duty and property related issues feel free to contact our Conveyancing Solicitors.