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Stamp Duty Land Tax set to increase on buy-to let and second homes

Posted: 10th December 2015   In: Residential Conveyancing

The Chancellor, George Osborne, announced in the autumn statement that buy-to-let investors and second home buyers will pay an additional 3% of the purchase price of properties in respect of Stamp Duty Land Tax from 1st April 2016. This means on a £250,000 property they will pay £10,000 of SDLT, rather than £2,500.

The tax is paid on increasing portions of a property priced above £125,000 when you buy a house or flat. Currently buyers pay nothing on the first £125,000, 2% on the portion up to £250,000, 5% up to £925,000, 10% up to £1.5m and 12% on anything else. These rates will remain the same for buyers who own only one property and the increase will only affect buy-to-let investors and second home buyers.

The Chancellor advised that the move is designed to raise £3.8 billion in tax and help potential first-time buyers afford a home by reducing demand from buy-to-let investors. However, concerns have been raised that the increase in the SDLT rates could push up house prices even further in the short term. This is because buy-to-let investors and second home buyers will act swiftly to purchase properties before the new rules come into force on 1st April 2016.

It has been suggested that landlords are likely to introduce rent increases to offset the increase in SDLT. Further to this, it has also been suggested that fewer landlords will come into the market, which means there will be a lack of supply, and rents will rise.

Set out below is how the new rates will affect buy-to-let investors and second home buyers

House Price

First Home

Buy to let/Second home

£100,000

Zero

£3,000

£125,000

Zero

£3,750

£150,000

£500

£5,000

£175,000

£1,000

£6,250

£200,000

£1,500

£7,500

£250,000

£2,500

£10,000

£300,000

£5,000

£14,000

£400,000

£10,000

£22,000

£500,000

£15,000

£30,000

£750,000

£27,000

£50,000


Please contact Gurjit Dhadar or Dipak Odedra if you would like more information about the issues raised in this article or any aspect of buying or selling a house. 

Posted by: Gurjit Dhadar
Residential Conveyancing
Luton Office