Changes to house buying costs – stamp duty increases from April 2016

Autumn 2015 saw George Osborne make further changes to stamp duty land tax (SDLT), which is payable on the purchase of property in England and Wales.

From 1 April 2016, higher rates of stamp duty will be charged on second homes, including buy-to-let properties. The additional tax raised will be used fund affordable housing initiatives, and reflects current government housing policy to encourage first time buyers.

The rate of SDLT charged on second homes will vary depending on the purchase price of the property – the higher rate will be 3% above the current SDLT rates. The Government has confirmed that higher rates of tax will not be charged on residential property purchased by corporate investors or investment funds.

Are these changes bad news for property investors? Residential properties (other than a main residence) are also subject to Capital Gains Tax (CGT) on a sale. Property investors will be pleased to note that the costs of acquiring the property, including any increased SDLT charged, may be offset against chargeable gains in order to reduce any tax liability on a future sale of the property.

Many have commented that the changes have created a degree of uncertainty. There are many situations where a person may have a second home which is neither a holiday home nor a buy to let, for example a new main residence may be purchased before the old one is sold, and it is not clear how the new SDLT regime will apply. The government has said that it will be consulting on the new policy in detail shortly.

If you are unsure about how the new SDLT measure will affect you and would like some further advice, please contact