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Stamp Duty News
Stamp duty for first time buyers has been abolished for most purchasers.
Stamp duty for buy to let property has increased substantially from April 2016.
Stamp duty for second homes also attracts a 3 percent surcharge from April. Mobile homes, caravans and houseboats are exempt.
Stamp duty refunds are available for home movers replacing their main residence. The original home must be sold within 3 years.
Stamp duty calculations are different in England and Northern Ireland to LBTT calculations in Scotland and LTT calculations in Wales.
Stamp Duty Changes in the UK
On December 4th 2014 stamp duty on property purchases was reformed by the Government.
Changes to Stamp Duty
As a result of the stamp duty reform, the Chancellor George Osborne stated around 98% of purchasers in England and Wales would pay less stamp duty. Changes to stamp duty meant people who buy homes for under £937,000 would pay less in tax when compared to the old system.
From April 2016 a 3% SDLT surcharge has applied to purchases of buy to let property and second homes. In Scotland a similar LBTT 3% surcharge applies to additional property transactions from April 2016.
From April 2018 Stamp Duty in Wales has been replaced by Land Transaction Tax (LTT). Inline with the rest of the UK, there is a 3% LTT surcharge applied to additional property purchases.
Old Stamp Duty System
With the old system before December 2014, stamp duty was considered to be a "slab tax" where higher rates were incremented and applied to the whole property purchase price.
The old system meant there were sudden increases in stamp duty liability as the purchase price rose above the next threshold.
This had a negative impact for both purchasers and vendors with costs increasing or values artificially dimishing around each threshold.
New Stamp Duty System
Since December 2014 the tax system has become "progressive" and rate increases are applied between stamp duty thresholds only.This means stamp duty rate increases are no longer applied to the whole purchse price.
Because of this progressive nature, the new system has been compared to income tax. The updated stamp duty thresholds range from £125,000 to £1.5 million.
Changes to Stamp Duty in Scotland
Following on from changes to Stamp Duty in England Wales and N.Ireland, stamp duty in Scotland was reformed on April 1st 2015. Stamp duty in Scotland has been replaced by Land and Buildings Transaction Tax (LBTT).
LBTT in Scotland works in a very similar way to Stamp Duty in the rest of the UK. LBTT is a progressive tax with slightly different thresholds ranging from £145,000 to £750,000.
The Scottish Government have introduced first time buyer relief from June 2018. By increasing the initial LBTT threshold to £175,000 for first time buyers, the Scottish Government predict the majority of first time buyers will pay no tax.
Changes to Stamp Duty in Wales
Stamp duty in Wales has been reformed from April 2018 and has been replaced by a new Land Transaction Tax (LTT).
Like LBTT in Scotland, LTT in Wales works in a very similar way to Stamp Duty in England and Northern Ireland. LTT is a progressive tax with slightly different thresholds ranging from £180,000 to £1,500,000.
No additional relief is available for first time buyers under the new LTT scheme.
Buy to Let and Second Homes
Levels of stamp duty for buy to let property and stamp duty for second homes has now changed.
Changes were announced by the chancellor in his 2015 autumn statement and came into effect from April 2016. The stamp duty changes introduced a significant rate increase for property being purchased in addition to a main residence.
From 1st April 2016 a 3% surcharge has been applied to buy to let and second home purchases with a new lower initial threshold of £40,000. Given that the vast majority of second home purchases fall outside this threshold, more transactions will now attract stamp duty than in previous years.
Anyone who purchases a property in addition to their main residence is now liable for the surcharge even if the property is not let out.
In Scotland LBTT rates have also increased for purchasers of second homes. The 3% LBTT surcharge was introduced at the same time as the rest of the UK.
To compare SDLT calculations before and after April 2016 please visit our buy to let stamp duty page.
Stamp Duty for First Time Buyers
In the Autumn Budget on November 22nd 2017 the Government announced changes to stamp duty for first time buyers. The changes, which were applied with immediate effect, meant that stamp duty for most first time buyers in England and N. Ireland had been permanently abolished.
First time buyer rates are currently the same as previous homeowners with all individuals benefitting from the stamp duty holiday which is set to last until 31st March 2021.
Please refer to our stamp duty for first time buyers page for more information.
