The Government has launched its consultation into controversial changes to Stamp Duty Land Tax that will see costs spiral for buy-to-let landlords.
The consultation document was published on December 28 – a bank holiday – in the middle of the Christmas and New Year holiday period.
The plans, put forward by Chancellor George Osborne in his Autumn Statement, will see an additional 3% stamp duty added to any property bought as a buy-to-let or second home and are due to be brought in on April 1.
HM Treasury has now issued an open consultation document, ‘Higher rates of Stamp Duty Land Tax on purchase of additional residential properties’ asking for input from stakeholders including the Residential Landlords Association on how the new rules will be implemented.
Stamp Duty is paid on increasing portions of a house or flat priced above £125,000. Currently buyers pay nothing on the first £125,000, 2% on the portion up to £250,000, 5% up to £925,000, 10% up to £1.5m and 12% on anything else. This means that a first time buyer purchasing a £250,000 property will pay £2,500 in Stamp Duty, whereas a landlord will pay £10,000.
The consultation paper gives more detail on the plans, which were first announced in November and states that higher rates will only apply to purchases of additional residential property completed on or after 1 April 2016.
If contracts were exchanged after 25 November 2015 then the higher rates will apply if the purchase is completed on or after 1 April 2016. However, if contracts were exchanged on or before 25 November 2015 but not completed until on or after 1 April 2016, the higher rates will not apply.
A total of 21 questions are included in the document, asking stakeholders their opinion on issues including the rules surrounding joint purchases, refunds and exemptions.
Under the current proposals the Government will treat married couples or civil partners as a unit, whereas unmarried couples can avoid the surcharge by buying a property under each of their names – plans which have already come in for criticism from RLA Chairman Alan Ward in the national press.
Joint purchases are one of a number of issues raised in the paper, as well as plans for exemptions for those owning a large number of properties or buying homes in bulk.
The Government said it is introducing the Stamp Duty surcharge to support first-time buyers and that some of the cash raised will be spent on affordable housing.
The consultation document states: “The Government believes it is right that people should be free to purchase a second home or invest in a buy-to-let property.
“However, the Government is aware that this can impact on other people’s ability to get on to the property ladder. Applying higher rates of SDLT to additional residential property purchases is part of the government’s commitment to supporting home ownership and first time buyers.”
The Residential Landlord Association’s policy director David Smith is currently preparing a formal response to the document.
The five-week consultation period ends on February 1, with the final details to be revealed when the Budget is announced on March 16.