A renovated 1960s bungalow in Devon
Tell us about this new Stamp Duty surcharge
From 1 April, a three per cent surcharge (which will be charged in addition to current stamp duty rates) will impact anyone who already owns a home and purchases a second property, whether that’s a holiday home, a house to help a child on to the property ladder, or a buy-to-let.
Why has this surcharge been introduced?
One reason is to try and cool down the London and south-east property market. The government sees buy-to-let as a key problem here and so this additional charge is set to discourage that, and ease supply of housing for first-time buyers.
What does this mean for self builders or those looking to purchase a new home to renovate/extend?
Self builders often create their main homes but retain their existing property to live in during the works. If the plot they are purchasing is classed as ‘residential land’ – ie a replacement dwelling or a garden plot – then the additional surcharge will apply. They then have 18 months from the time of purchase to sell their previous house, and then they will receive a refund of three per cent.
This, however, is not long, given the time required to gain planning approval and then build the house. That’s not to mention the cashflow barrier self builders typically face — this would make them three per cent worse off. NaCSBA has already pitched for self-builders to be exempt from these charges, asking for building plots to be treated as non-residential land (in which case, just the normal stamp duty would apply). If they keep their old house after the build, they will not be entitled to the refund.
The same applies for renovation projects — you have an 18-month window. There’s potential for some leeway on this, but there are no further details as yet.
When will this take effect?
The charges will take effect from 1 April in England, Northern Ireland and Wales. Scotland will run a parallel scheme.
Are there any exemptions?
There are no loopholes, but there are certain exemptions, such as if the home is worth less than £40,000. Corporate investors who own 15 or more units will also be exempt, as these are likely to be companies whose interest lies in the private rental sector. If you have exchanged on a house off-plan already but do not complete until after 1 April, then you will also be exempt.
For those thinking of getting round it by putting the property in their partner’s name, those living as a household unit will be classed as one, whether they are married or not.