Q: We are about to complete the purchase on a new house but we have not yet sold the house we are living in. What is the situation with the new rules on stamp duty and do we need to pay it?
A: Yes, under the new rules introduced on 1st April 2016 you are now required to pay the increased level of stamp duty on your second home.
However, if you are intending to live in this new home and sell your original home it may be possible to apply for a refund on the extra stamp duty you have paid on the new home, if you complete the subsequent sale of your original home within 36 months.
The changes in Stamp Duty were brought in by the Government in a bid to free up housing for buyers. The additional 3 per cent charge applies to anyone owning a second property that isn't their main residence. For example; parents buying a property for their children or a couple purchasing a home together where one is already a homeowner. This meant that a home worth £250,000 will now accrue an additional £7,500 taking the total bill to £10,000.
Only houseboats, caravans, homes under £40,000 and some multiple purchases are exempt.
There are options worth considering;
- Buy-to-let landlords could incorporate their business into a limited company so they’ll pay corporation tax instead of income tax, which is lower. However, companies owning more than one property will also be hit for increased tax.
- Helping your children get on the property ladder? – The only way round this would be to buy the home in the child's name outright as joint name ownership will still make you liable for Stamp Duty payment.
For advice on Stamp Duty, please contact Chris Illingworth in our Frodsham office on 01928 739300 or by email firstname.lastname@example.org