Published: 21st January 2016.
While the changes initially seem complex, there are a number of key points at the heart of the proposal that we’ve brought together here. Keep visiting this page for regular updates throughout the consultation period.
The core of the change is a proposed 3% increase in Stamp Duty on purchases of ‘additional residential properties’ in England, Wales and Northern Ireland where completion takes place on or after 1st April 2016 (unless contracts were exchanged before 25th November 2015). The Government is consulting on these changes at present, and at this stage the following are thought to be the most notable points for buyers and investors looking to purchase property in London. Note that this is not an exhaustive explanation of the proposal and will change as the consultation progresses. It is intended as an introductory overview of the proposed change, and should not be treated as legal advice.
1. Additional Residential Properties
The purchase of an ‘additional residential property’ currently refers to the purchase of a home that will not replace the buyer’s main residence. A buyer will generally be liable for the 3% surcharge if, at completion, they own two or more residential properties including the one they live in.
2. Sale of Existing Main Residence
If the property being purchased after April 1st will replace the buyer’s main residence, but that main residence has not sold at the time of completion, the purchase will be liable for the 3% Stamp Duty surcharge. If the original main residence is then sold within 18 months of completion on the new property the 3% surcharge will be refunded.
3. Companies Buying Residential Property
As the proposal stands, the surcharge will also apply to companies buying any residential property. This is intended to close the loophole that would otherwise be available to individuals buying property through a company they own or part-own.
4. Married Couple, Civil Partners & Cohabitants
Married couples and civil partners will be treated as an individual when purchasing a residential property. As such, if either member of the couple already owns residential property, the 3% surcharge will apply. Unmarried couples or other cohabitants (such as siblings or a group of friends) will not be liable for the surcharge in the same circumstances.
5. Two or More Properties Worldwide
The ‘two or more properties’ rule is proposed to apply regardless of where in the world any property already owned is, providing that the buyer is purchasing a home in England, Wales or Northern Ireland. For example, a buyer who owns a house in France and wants to buy a second property in London will be liable for the 3% Stamp Duty increase.
6. Unaffected Parties & Exemptions
The proposed Stamp Duty changes will not affect the majority of property purchases. The surcharge will not apply to first-time buyers, and owner-occupiers moving home will also be unaffected providing they sell their property before completing on their new home. The Government is also currently discussing an exemption for investors purchasing 15 or more residential properties in one transaction.
We hope that this overview has helped to clarify the current proposed changes to Stamp Duty payable on additional residential properties. If you have specific questions regarding your position or purchase you should speak to your conveyancer or legal representative.
It is important to remember that this proposal is still in the consultation phase, and is liable to change. Please keep visiting this page for regular updates as the consultation evolves.
Last updated: 21st January 2016.