Q&A - How will the new rates of stamp duty land tax impact if I buy a second home?

24/03/2014

Q: I am thinking about buying a second home for £200,000. Initially it would be a holiday home but in the long term I may decide to rent it out. Can you please explain the changes being made to stamp duty land tax and how those changes will affect me, especially if I decide to rent out the property? 

A: The Government have announced increased rates of SDLT (stamp duty land tax) that will come into effect from the 1st April 2016.   Under the new rules the rate of SDLT on a second property, whether that’s the purchase of a buy to let property or a second home costing more than £40,000, will be subject to a 3% surcharge.

SDLT is currently calculated at 0% for properties costing £0- £125,000, 2% on properties costing £125,001- £250,000, 5% on properties costing £250,001- £925.000, 10% on properties costing £925,000- £1,500,000 and 12% on properties costing £1.5 million and above.

The current rates are chargeable on the portion of the purchase price which falls within each band. But from the 1st April 2016 the SDLT rates charged on the purchase of a second home will be 3% from £0-£125,000 purchase price, 5% on £125,001- £250,000, 8% on  £250,001- £925.000, 13% on £925,000- £1,500,000 and 15% on property purchased for £1.5 million and above.

So, on a purchase price of £200,000.00, before the 1st April 2016 the payable SDLT would be £1,500.00. This is based on paying zero per cent on the first £125,000 of the property value and 2% on the portion between £125,001 and £250,000.

After the 1st April 2016 the payable SDLT would be £7,500.00. This is based on 3% for the first £125,000 and 5% instead of 2% on the amount between £125,001 and £250,000.

Iain Hall

Iain Hall

Senior Solicitor

Part of our Property team in Wrexham

Richard Lloyd

Richard Lloyd

Partner

Our Senior Partner and Head of the Property team in Oswestry