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Extra Stamp Duty on second homes: – What you need to know

From 1st April 2016 a 3% London Stamp Duty  surcharge will apply to any additional properties you buy. This is on top of the regular Stamp Duty.

Here is everything you need to know about the new 3% London Stamp Duty  surcharge.

Who has to pay the new 3% London Stamp Duty surcharge?

The surcharge applies to everybody in the UK who buys any property when they already own another one, even if the owned property is overseas.

How is the extra Stamp Duty charged?

Whilst regular Stamp Duty is similar to Income Tax in that it is tiered and you pay a percentage on the amount above each threshold, the extra 3% Stamp Duty will be charged on the entire price of the property.

The 3% Stamp Duty surcharge is added to the regular Stamp Duty.

What if you are just moving home?

If you buy and move into a second property and sell your first property you will not have to pay the extra 3% Stamp Duty.

If you buy a second property and sell your first property within 36 months HMRC will give you a full refund of the extra Stamp Duty.

Buying a property with somebody else

If you already own a property and buy a property with somebody for whom it will be their first property, you will still have to pay the extra 3% London Stamp Duty .

Your solicitor and buying a second home

Failing to tell your solicitor that you already own a property when you are buying another one to avoid the surcharge is fraud and you will be penalised. In fact HMRC has told property solicitors to ask their clients whether they already own a property.

Starting a limited company to avoid the extra Stamp Duty

The Government will be looking out for people who buy a second property through a new limited company to avoid the new surcharge.

Exemptions

You will not need to pay the 3% surcharge on any additional properties what cost less than £40,000. Houseboats, mobile homes, and caravans are also exempt from the 3% surcharge.

Charities are also exempt from the surcharge.

Offsetting the 3% Stamp Duty surcharge

If you pay any Capital Gains Tax when selling a property you can offset the 3% surcharge against your bill.

More advice on mortgages

If you are looking for more advice on how the 3% London Stamp Duty  surcharge affects you, or you want help in finding the right mortgage, get in touch with an Oracle consultant.