The 3% stamp duty

The whole financial picture with owning more than one property has changed in recent years. Tax changes and new mortgage lending regulations have made things much tougher for landlords and landladies, whether they have a huge portfolio of properties and manage them for a living or have simply retained their previous or first home as an investment for the future.

Since April 2016, landlords have faced a 3% surcharge on stamp duty - or Land and Buildings Transaction Tax in Scotland - if they already owned another property. There have also been changes to what landlords can claim in tax relief.

One of the major changes has been in HMRC’s Stamp Duty Land Tax (SDLT), more commonly known as Stamp Duty in England and Northern Ireland. Anyone purchasing a property or land over a particular price in these areas must pay Stamp Duty.  

Prior to 1st April 2016, Stamp Duty rates were the same regardless of how many properties you owned.

Today, if you only own one property you pay no stamp duty, as long as the purchase price is under £125,000; however, if you own more than one property, you will have to pay 3% of the purchase price of the new property if it costs more than £40,000. In other words, nobody pays Stamp Duty on any property valued at less than £40,000.

If buying a property which is valued somewhere between £125,000 and £250,000, a multiple property owner will pay 5%; if a property is valued between £250,000 and £925,000, that figure rises to 8%. If you are purchasing a property over £925,000 and you are a multiple property owner, you’ll pay 13%. And this percentage rises to 15% for those multiple property owners buying a property valued at over £1,500,000.

These are significant amounts of money and there is no doubt it has dissuaded many from taking the leap into owning property for investment, whether it’s your pension plan, income or simply for fun.

However, if you see how much property values have risen over time the extra stamp duty, you can take a rational calculation as to whether the extra cost of the upfront tax can be regained over the time you plan to own the property.

We are always happy to help you assess your own, individual set of financial circumstances and will be able to advise you on the course of action that is most suitable for you.

It is important to note that Scotland and Wales have different taxes.

If the property or land is in Scotland, there is a different tax for purchasers; this is the Land and Buildings Transaction Tax (LBTT).

In Wales, if the sale was completed on or after 1st April 2018, purchasers are bound by the Land Transaction Tax (LTT).

Here, at Euxton Mortgage Market, we can help you whether you wish to purchase a property or land in England, Northern Ireland, Wales or Scotland.

July 2018