Buy to let landlords under attack
Recent changes in legislation, as part of Government policy to encourage first time buyers and owner – occupier purchases, have focused on the position of buy to let landlords.
As from April 2017 the reduction of tax relief on finance costs to the basic rate of tax will begin to be phased in and this will be fully in place from April 2020. In November guidance was given on the increases in Stamp Duty Land Tax (SDLT) which were first announced a year earlier .The position is as follows:
Higher Rates for Purchases of Additional Residential Properties
The higher rates are 3% above the standard rates of SDLT that apply to purchases of residential property. For example, the SDLT due on the purchase of a buy to let property for £300,000.00 would be calculated as follows:
|3% on the first £125,000.00
|5% on the next £125,000.00
|8% on the final £50,000.00
|Total SDLT Due
The higher rates will not apply to purchases of:
(a) non residential or mixed use properties;
(b) transactions where the consideration is less than £40,000.00; and
(c) caravans, houseboats and mobile homes
When Do The Higher Rates of SDLT Apply?
If an individual is purchasing a single dwelling the higher rates of SDLT will apply if conditions (A) to (D) below are met:
(A) the chargeable consideration is £40,000.00 or more (the threshold for other purchases being £125,000);
(B) the dwelling is not subject to a lease which has more than 21 years to run on the date of the purchase;
(C) the purchaser owns a major interest in another dwelling which satisfies conditions (A) and (B); and
(D) the dwelling being purchased is not replacing the purchaser’s own or main dwelling.
Where an additional property is purchased by joint purchasers the higher rates of SDLT will apply even if conditions (A) to (D) are met by only one of the purchasers.
Please note that when an individual with a spouse or civil partner purchases an interest in a dwelling and their spouse or civil partner is not a joint purchaser, the spouse or civil partner will be treated as a joint purchaser. Therefore, if the spouse or civil partner owns a property and meets conditions (A) to (D) then the higher rates of SDLT will apply even though the spouse or civil partner is not a joint purchaser.
Replacement of a Main Dwelling
If you buy a main dwelling but the sale of your previous main dwelling is delayed then you will pay the higher rates of SDLT. However, if you sell your previous main dwelling within 3 years then you can claim a refund of the additional SDLT from HMRC.
If you own more than two properties and you sell your main dwelling you will not pay the higher rate of SDLT if you purchase a new main dwelling within 3 years of the sale of your previous main dwelling.
The legislation in respect of the higher rates of SDLT is complex and there are many exemptions and intricacies that need to be considered on the facts of each case. If you require any further information please do not hesitate to contact a member of the Property team.