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Government launches consultation on controversial Stamp Duty plans

Sally Walmsley
Written by Sally Walmsley

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 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.

About the author

Sally Walmsley

Sally Walmsley

Sally Walmsley is the Magazine and Digital Editor for the NRLA. With 20 years’ experience writing for regional and national newspapers and magazines she is responsible for editing our members' magazine 'Property', producing our articles for our news site, the weekly and monthly bulletins and editorial content for our media partners.

12 Comments

  • The increased stamp duty on but to let is to me very odd logic. I rent out some 8 properties in London I rent them long term at market rents as advised by my agent. I am providing much needed accommodation for Londoners Not every one wants rot buy and tie themselves down to one location Surely those looking /wanting wrk should go where they find the best job Owning a house just tires them down This is particularly relevent for young people ok once kids come along yes perhaps they need to settle down.

    The Government could make more money by ensuring BtL landlords pay their CGT on a sale Instead of the HMRC having to trial sales and Land transfer deeds In NZ they resolved this problem easy by ensuring the the LTO is formally notified and the landlords tax ID is given

  • George Osborne has got this so wrong.Less people will purchase buy to lets, simple economic theory , less rental stock with the same demand equals higher rents.With the current shortage of rental stock he actually should be encouraging buyers and stopping stamp duty for Landlords!

  • This consultation is designed to provide a contradictory piece of legislation which will do more to raise taxes than provide first time buyers with an opportunity to purchase a home. It treats couples as a single unit in the property purchase system whilst allowing those without formal commitments to operate individually. It allows multiple purchasers of property an exemption to SDLT. It is designed to provide a sound bite for the government as to what it is doing to provide homes for first time buyers whilst protecting the rich and company buyers of multiple homes.

  • I currently own several rental properties as well as my principal private residence. If I sell my current residence to buy a new property for me to live in will I be subject to the higher Stamp Duty as I own several properties?

    • The consultation document states that if you are replacing your main residence then you will NOT pay the higher rate (see excerpt below, taken from the document)

      Where a purchaser (or, in the case of joint purchasers, all purchasers) own one property at the end of the day of a transaction they will not pay the higher rates. Purchasers will only need to determine whether they have replaced a main residence if they own two or more properties at the end of the day of the transaction.
      In that situation, a purchaser will pay the higher rates of SDLT if they are not replacing their main residence. If they are replacing their main residence, they will not pay the higher rates.
      In most cases, where individuals move house they may purchase and sell property on the same day (for example, if they are involved in a chain of transactions). However in some circumstances people may sell their old main residence some time before, or some time after, purchasing a new main residence.
      Where an individual sells their previous main residence after purchasing a new main residence, a refund of the higher rates may be claimed.
      Most individuals only have one residence at any given time. Where an individual has more than one property, in most cases it will be clear which one is the main residence. For example where an individual owns two properties, one which they live in and one which they let out.
      Individuals will not be able to elect which of their residences is their main residence and therefore the treatment of a main residence for the purposes of the higher rates of SDLT may differ from the treatment for capital gains tax.
      The government’s view is that any elective treatment for SDLT may reduce uncertainty but it would be open to abuse and on balance is not justified. Instead, the government proposes that whether a property is a main residence will be based on fact.

      HMRC will take into account a number of factors when considering whether a given property is an individual’s main residence. These will include:
      where the individual and their family spends their time;
      if the individual has children, where they go to school;
      at which residence the individual is registered to vote;
      where the individual works;
      the location and degree of furnishing and location of moveable possessions; and
      the correspondence and registration addresses given to various organisations.
      In most cases the position will be clear and few factors will need to be considered. For example, where a married couple own two properties, one of which is convenient for their work and their children’s school and where they spend most of their time, and a holiday home which they visit occasionally, the former property would be their main residence.

      The government proposes a two stage test to determine whether a purchase of a residential property is a replacement of a main residence or not. The first is whether, at the time of the transaction, a property sold in the last 18 months was the only or main residence of the individual. The second is whether the purchaser of the new property intends to occupy that property as their only or main residence.
      When considering the first stage of the test, the property being sold must have been the only or main residence of the purchaser at some point in the 18 months before the purchase of the new property. In the majority of cases, an individual owns only one residence throughout a period, and it is this residence that will be their only or main residence.
      Where an individual has more than one residence, which of these was their main residence will be a question of fact.

      The second stage of the test is prospective and based on whether the purchaser intends to use the newly purchased property as their only or main residence. Where an individual has made plans at the date of purchase to move into the new property as their only residence, it will be obvious that the intention test is met.
      Where evidence clearly shows that either another property will continue to be their main residence or that the property is purchased for some other purpose (such as use of a buy-to-let mortgage or other evidence of an intention to market the property for rent) the transaction will not be a replacement of a main residence.

  • Robbing Peter to pay Paul is not intelligent policy-making. In this case, Buy-to-Let owners are not the main cause of First-time Buyer difficulties. Their main problem is that they refuse to save money for a large enough deposit, because they want to enjoy the good life. So in practice, this proposed change is just a stealth tax, levied on the small investor who has little political clout – and is similar to the 20%/40% tax change, which does not affect large property owners who use a company..

    • Private individuals can input in the same way as other stakeholders.
      Clicking the link in the introduction will bring up the consultation papers, which include a number of questions.
      In Section 4 there are details as to where the responses should be send, either by post or email.

  • I’m a landlord and my buy to let portfolio is my pension. The government provides tax relief for personal pensions and taxes us to the hilt on our BTLs. The decision to withdraw tax relief on mortgage interest is bad enough but to hit us again with 3% stamp on our future pension investments is just calus. People showing a bit of initiative to invest in their future should not be penalised. I thought the government wanted us all to do more of this!! I will be certainly be offsetting some of my extra tax in increased rent. Ultimately private renters and housing benefit renters will be hit.

  • I am a landlord with a just a few properties. I am determined to get out of business, it
    is no longer worth it.
    It is a lot of work looking after tenants 24/7. The fixed cost to the landlord have gradually increased, such as gas certificates, maintenance and checking of the fire alarms, electrical safety certificates, Insurance, and ensuring that the insulation is up to standard.
    With interest relief being withdrawn, and capital gain tax to pay as well, it will be difficult to cover expenses with no pay for the work I put in, in order to provide a high standard. So far I have managed, because I do not use an Agent and I do a lot of work, such as painting between tenants myself to keep cost down.

  • The common perception is that all landlords are filthy rich. Very wrong.
    That may be true in London but not in the vast majority of the country. I worked in the Lettings Industry for 30 years and I know that most landlords only just balance their books, especially in early years, and make very little profit in the first 10 years.

    I think this move is bad, will stifle investment and slow down the availability of rental property from the private sector, which councils and the government rely on to house people. Our new house building record is still atrocious and the banks still don’t want to lend, much.

    Bad move chancellor. People will re-arrange their loans to minimise any benefit you may think you are going to achieve over just a few years, and who will land up paying the net cost? THE TENANT. So, bad for landlords, bad for tenants, bad for the government and country in general. This is a classic own goal. Greed first, thought later and another U-turn in the offing.

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