Higher rates of Stamp Duty Land Tax on Buy to Let Properties
Effective from 1 April 2016 the government have announced additional stamp duty land tax rates for purchases of additional residential properties, such as second homes and buy-to-let properties
HMRC has confirmed that the changes will apply to all completions that take place on or after 1 April 2016, but contracts that have been entered into on or before 25 November 2015 will not be affected, subject to normal rules about variation or assignment of these contracts.
The higher rates will not affect transactions with a purchase price of up to £40,000 where a stamp duty land tax return is not required. The changes will also not apply to the purchase of a main residence or to corporates and funds making significant investments in residential property.
The higher rates will be an additional 3% to the existing stamp duty land tax rates. The current rates and new rates of stamp duty land tax for additional residential property purchases are:
| Band | Existing SDLT rates | New additional SDLT rates |
| *£0 – £125k | 0% | 3% |
| £125k – £250k | 2% | 5% |
| £250k – £925k | 5% | 8% |
| £925k – £1.5m | 10% | 13% |
| £1.5m + | 12% | 15% |
*Only applies to purchases over £40,000. For purchases at £40,000 or under no stamp duty land tax return is required.
The government will consult on the policy detail, including on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate, so watch out for further announcements.
The government will consult in 2016 on changes to the stamp duty land tax filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. These changes will come into effect in 2017 to 2018
The government has said that it will use some of the additional tax collected to provide £60 million for communities in England where the impact of second homes is particularly acute but what exactly does this mean and indeed what is the impact going to be for both investors and tenants alike?
In truth opinion is divided, however having spoken to various clients of ours whilst views seem to differ there is an underlying common theme.
Some say that they will be put off purchasing an investment property as with the administrative and financial burdens introduced by the stamp duty land tax changes, the Deregulation Act 2015 and the The Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations 2015 it is no longer a viable option to “dabble” with investment properties.
Does this therefore mean that there will be less landlords and therefore less rental properties or does it mean that the professionals will continue to expand their empires with little or no effect on the number of available rental properties?
From what we have been told by letting agents and clients alike the knock-on effect is not anticipated to be good news for prospective tenants and the reasoning appears to be as follows
If less people purchase investment properties, the number of properties available should decline meaning that in the current market more and more people will be chasing fewer properties. If one applies the theory of “supply and demand” rental prices increase.
Some have commented that as the rental market is currently buoyant the additional cost will just be passed onto tenants, thus again increasing rents. Others feel that if there are less landlords as a whole, competition is reduced and as a result, those that remain in the market are going to be in a position to seek a higher return and again push up rents.
Whatever the rights and wrongs, this is clearly going to be an emotive subject.
Need advice on these changes, speak to for clarity on your position as either an existing landlord or if you are considering entering into the buy-to-let market and need guidance on the updated stamp duty land tax rates.