Stamp duty take increased as a result of second property tax hike

By Lauren Burns

The Treasury received 18 per cent more stamp duty in 2016 compared to the previous year, evidence that property investors have not been deterred by the higher rate of land tax, and adding fuel to the argument that the additional 3 per cent rate is unlikely to be scrapped in the next Budget.

In April last year HMRC introduced a second tier rate of stamp duty land tax which would apply to anyone purchasing an additional property. Those affected had to pay an additional 3 per cent above the normal rate of stamp duty. While it was initially brought in to target buy-to-let investors, a large number of other home buyers have unwittingly found themselves liable for the higher rate of tax. There had been hopes that the higher rate would be scrapped in April 2017, but it quickly became apparent that the HMRC had created a very lucrative change to the tax system that might prove difficult to let go.

The latest statistics show that £8.28billion was received in stamp duty payments in 2016. The higher tax rate was introduced in April, and in the last 6 months of the year, approximately 20 per cent of sale transactions involved the purchase of an additional property and was therefore liable for the higher rate of stamp duty.

It is widely considered that the introduction of the second property tax rate has done little to nothing to improve the opportunities for first time buyers, but while that may have been one of the main motives for the stamp duty change, it is now considered more than likely that it will survive the next Budget on the basis of its sheer profitability.

 

How is Stamp Duty currently calculated?

The STANDARD RATE for first time home buyers and home movers is charged as follows:

You pay Stamp Duty Land Tax (SDLT) on increasing portions of the property price above £125,000 when you buy residential property:

 

Property or lease premium or transfer value

SDLT rate

Up to £125,000

Zero

The next £125,000 (the portion from £125,001 to £250,000)

2%

The next £675,000 (the portion from £250,001 to £925,000)

5%

The next £575,000 (the portion from £925,001 to £1.5 million)

10%

The remaining amount (the portion above £1.5 million)

12%

 

Example

If you buy a house for £275,000, the SDLT you owe is calculated as follows:

0% on the first £125,000 = £0 2% on the next £125,000 = £2,500 5% on the final £25,000 = £1,250 Total SDLT = £3,750

 

HIGHER RATE

If the buyer is liable to pay stamp duty at the higher rate (usually because they already own a property and are about to own two):

Property or lease premium or transfer value

SDLT rate

Up to £125,000

3%

The next £125,000 (the portion from £125,001 to £250,000)

5%

The next £675,000 (the portion from £250,001 to £925,000)

8%

The next £575,000 (the portion from £925,001 to £1.5 million)

13%

The remaining amount (the portion above £1.5 million)

15%

 

If you are buying a second property in Northern Ireland, or perhaps purchasing or selling your first home, contact one of the property conveyancing solicitors at Wilson Nesbitt in Belfast or Bangor for advice by clicking here.