Lasting powers of attorney (LPAs) enable thousands of vulnerable people to have their financial and other affairs managed by others whom they trust. However, as a High Court case showed,...Continue reading
Stamp Duty Land Tax (SDLT) was brought in to replace the old ‘stamp duty’ and has been complex since its inception.
Among the transactions subject to SDLT are property sales. Levied at a rate of 2 per cent on purchases between £125,000 and £250,000 (higher rates apply above that), it adds significantly to the acquisition cost of many properties.
The UK currently has a buoyant residential property market and the values of residential properties are such that it is becoming extremely difficult indeed for first-time buyers to get on the housing ladder, as the deposits required are often substantial and saving towards them is made more difficult as rents follow property prices upward.
In addition, housing starts have been at a level below that which is needed to cater for the rise in demand for many years.
The situation has been exacerbated by the strength of the ‘buy to let’ market, as the combination of decent income yields and rising capital values has led to a great deal of the available housing stock being used for rental properties. Also, in some rural areas, the prevalence of second homes which are unoccupied for much of the time has eroded the local economies and put property well out of the reach of local people.
One of the ways in which the Government has decided to try to ameliorate this situation is to put in place measures that make second home ownership and owning ‘buy to let’ property less attractive. The hope is that this will cause some of these properties to be released back onto the market or at least act as a curb on demand.
Accordingly, a higher rate of SDLT has applied for such properties since 1 April 2016. The additional SDLT levied is 3 per cent on top of the existing rate and applies to the whole of the purchase price. Full details are here.
The higher rate of SDLT applies where the consideration paid for a second property or buy-to-let property is £40,000 or more, but does not apply if the property is a ‘mixed-use’ property, such as a shop with a flat above it.
In essence, the higher rate of SDLT will apply where, at the end of the day of purchase, you own more than one property, provided that the property being purchased is not replacing your current main residence. Where the existing main residence has not been sold, the higher rate of SDLT is payable, but is then refundable if that property is sold within three years of the completion on the second property. This test does not apply to purchases before November 2018. This is a transitional provision so as not to disadvantage those who disposed of their main residence before these measures were announced on 25 November 2015.
There are a number of complexities not dealt with above. A calculator can be found on the Government’s website.