Wed 25 Nov 2015
As part of his stated aim of supporting families buying their own home, the Chancellor announced that from 1 April 2016, purchases of additional homes and buy-to-let properties costing more than £40,000 will be subject to stamp duty land tax at a rate 3% higher than the current rates.
The higher rate will not apply the replacement of a main residence and purchases of caravans, mobile homes or houseboats will also be excluded. The Government will consult on policy details including whether an exemption for corporates and funds owning more than 15 residential properties.
Given the Chancellor’s concerns about families seeking to buy a home being squeezed out because more and more homes are buy-to-lets or second homes, often bought by non-residents, it would be logical that an existing home owned outside England, Wales and Northern Ireland, e.g. in Scotland or overseas, would nevertheless be taken into account in determining whether an additional house is being purchased. However, we will need to wait for the detailed proposals to be certain.
This may assist the Chancellor’s aim of creating more affordable homes but as the buy-to-let market is growing at a rate sufficient to cause concern to the Bank of England, this change, coming after the removal of the wear and tear allowance and the restriction on interest relief for buy-to let properties announced at the last Budget, may simply drive up rents rather than increasing the number of affordable homes.
The Government estimates that additional tax of just under £4 billion will be collected following the introduction of the 3% surcharge next year. They are also forecasting additional tax receipts of £30 million in the current year, presumably from purchases being accelerated to avoid the 1 April 2016 implementation date which may imply that the proposed legislation will not include anti forestalling provisions.
In addition to the above consultation, the Government will also be consulting on proposals to change the SDLT filing and payment process in 2017/18 including a reduction in the filing and payment window from 30 days to 14 days after the transaction date. So, not only will there be more tax to pay on additional homes, the payment date will be advanced.
Finally, it remains to be seen whether the Scottish Government will follow suit and introduce a similar surcharge for Scotland’s land and building transaction tax (LBTT) which applies to property situated in Scotland.
For more information contact James Summers
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