What you need to know about stamp duty on buy-to-let and second homes
- Buy-to-let and second home stamp duty surcharge adds 3% to all tax bands
- Charge was introduced in April 2016 and Treasury tried to close all loopholes
- Parents buying with children, those buying but selling an existing buy-to-let and those with a second home overseas are all hit
Buy-to-let landlords and second home buyers must pay extra stamp duty costs since a controversial 3 per cent surcharge was introduced.
From April 1 2016, anyone purchasing an additional property must pay an extra 3 per cent stamp duty – that means the charge applies to buy-to-lets, second homes and even a property you buy with your children.
The changes apply to companies and individuals no matter how many properties you are purchasing, here we outline the major changes to look out for.
Stamp duty calculator: How big a tax bill will your property purchase trigger?
Important update: Stamp duty has been radically reformed in the December 2014 Autumn Statement.
From 4 December 2014 the slab style system has been axed and a new progressive income tax-style system introduced.
Our calculator has been updated to show how much you will pay under the new system.
There is also a table below which shows how much you will pay at different levels and a further calculator that lets you compare the new and old systems.
STAMP DUTY CALCULATOR
In the Autumn Statement on 3 December 2014, Chancellor George Osborne set out plans to simplify Stamp Duty. This calculator incorporates the new rates and shows you much you win or lose. Calculator created by: Datify
HOW STAMP DUTY IS CHARGED AND HOW IT HAS SOARED
Stamp duty is charged on the entire purchase price of a property.
Until 3 December 2014, it was charged slab-style and percentages above thresholds were imposed on the full purchase price.
Reforms in the 3 December Autumn Statement by Chancellor George Osborne mean that it is now levied progressively, like income tax, with percentages stepping up above thresholds.
These new thresholds are:
- 0 per cent up to £125,000
- 2 per cent to £250,000
- 5 per cent to £925,000
- 10 per cent to £1.5million
- 12 per cent above £1.5million
Previously they stood at 1 per cent above £125,000; 3 per cent above £250,000, 4 per cent above £500,000; 5 per cent above £1million and 7 per cent above £2million.
A brief recent history of stamp duty
Before Gordon Brown’s time in charge of the nation’s finances stamp duty was a flat rate of one per cent above £60,000.
Additional levels were added of 1.5 per cent above £250,000 in 1997 and two per cent above £500,000.
As house price inflation took off, Mr Brown decided to cash in further by raising the tax again to three per cent above £250,000 and four per cent above £500,000 in 2000.
The 1 per cent initial level was raised to its current threshold at £125,000 in March 2006.
George Osborne raised stamp duty to five per cent above £1million in 2011, and seven per cent above £2million in 2012.
Despite the punitive nature of the higher bands, they never rose with the huge house price inflation seen since their introduction.
If stamp duty thresholds had risen in line with average property inflation since 1997, as measured by the Land Registry’s quarterly house price figures, in December 2014 the would have been:
3% – £787,500
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