How will the Stamp Duty changes affect you?
The new changes announced in the Spending Review and Autumn Statement in November last year will add 3 percentage points to the rate of stamp duty paid by the landowners who own more than one property from April 2016.
This caused a great concern to buy-to-let landlords as they may be forced to sell their properties in order to avoid the surcharge. This is likely to reduce the availability of rental homes in the market as the buy to let business becomes less profitable. It might also dampen the need for the properties that are placed in the market as buy to let investments and investors may decide to re think the decision of investing in the residential buy to let market before this stamp duty takes effect in April.
The people who were thinking of investing in property would want to do so before April and this means the prices of properties are going to rise from the beginning of the 2016.
The higher rates of SDLT will be charged on the purchases of additional residential properties that cost above £40,000 such as second homes and buy to let properties. However, the stamp duty does not apply to the purchase of caravans, mobile homes, houseboats, or in the case of cooperates or funds making significant investments in residential property.
Property in the UK is generally expensive and it is common for people to live far away from the places where they own residential property. They might have second homes, or may be living in rented accommodation in a pricier area while getting an income from renting their properties.
If they own more than one property, they will be liable to pay the surcharge; however, if people are living in rented homes and have put up their own property for rent, they will not have to pay additional stamp duty. If current owners of rental property move out of their primary home then sell it to buy another home, they will not have to pay the SDLT.
For the people who have two homes temporarily and they intend to sell one of their properties, they should do so before April but if it happens after April, the additional properties need to be sold within a period of 18 months after which the property owners can be returned the amount they paid for stamp duty.
In case of married couples, the property they reside in is considered as joint property and so, if either of them owns additional property, they will be liable to pay the stamp duty.
The changes in stamp duty is likely to take its toll on the people living in rented apartments as well as the landlords will undoubtedly raise the rents in order to cover the amount they will have to pay due to the stamp duty. Since the SDLT may force owners of smaller buy to rent properties to sell their properties, after April, there is also likely to be a decrease in rental properties. This may, in theory create a demand and supply gap as there will be more people wanting rental properties and not enough residential rentals available in the market.
For any further advice on the stamp duty increases, the property market in general or the potential sale of your home please contact us on 01158 820 448.
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