New Stamp Duty Rules For People with Two Properties
Anyone left with two properties in England, Wales or Northern Ireland after buying or selling will be hit with an extra 3 per cent stamp duty bill.
Buy-to-let landlords are set to be hit with new costs from April.
For example, anyone buying a £200,000 second home or buy to let before April pays stamp duty of £1,500.
This is based on paying zero per cent on the first £125,000 of the property value and 2 per cent on the portion between £125,001 and £250,000.
But from April, landlords will have to pay 3 per cent for the first £125,000 and 5 per cent instead of 2 per cent on the amount between £125,001 and £250,00.
This gives them a total bill of £7,500.
So a landlord would end up paying five times more than a private purchaser in this example.
It is not just landlords that will be hit but anyone owning a second home.
This could be parents buying a property for their children or a couple purchasing a home together where one is already a homeowner.
Forming a company
Many landlords are setting up limited companies to shield themselves from earlier announced buy-to-let changes that will see mortgage interest relief reduced to the basic rate of tax from April 2017.
Companies can still get mortgage interest relief at their marginal rate, which may be higher than the basic rate of 20 per cent, but they won't be able to escape the extra stamp duty charges.
Buying a home and keeping your old one or flipping your main residence
If you buy a second property you will always have to pay the higher rate of stamp duty, even if you plan to live in it and rent out your old one.
If you keep your old home at the time of completion you will need to pay the extra stamp duty charges, even if you move into a new main residence.
The only leeway is that you can get a refund of the stamp duty if you sell your old property within 18 months. This aims to help those who may hit delays in the selling process.
You will need to apply for the refund through HMRC.
