Impacts holiday homes, parents helping children and all buy-to-let investors
Government confirmation of the additional 3% stamp duty rules for people with 2 or more properties.
From April 2016 those people buying more than property will be liable to a 3% increase in stamp duty. This new tax has caused a sudden surge in property buying since its announcement last autumn especially by buy-to-let investors, driving up property prices.
However the new rules now means some buyers who are not investors but own 2 or more properties will be effected. These could be people who briefly own two homes, those who own a holiday home abroad and those who are helping out children buy their first property and are on the property deeds due to mortgage requirements.
Those people with a second home abroad will be liable for the new additional 3% stamp duty when they come to sell their main UK property and move to a new home. As these types of people normally have expensive homes the extra stamp duty costs on a £500,000 would be £15,000. So a cheap property in the sun could cost dearly.
Parents helping children
Parents who help their children buy a property could also be liable and fall into the new stamp duty trap. In the past mortgage companies may require a guarantor and this could be a parent. Now days this is rarer and mortgage companies require the parent to apply with the child for a joint mortgage. The issue with the joint mortgage is that the parents name will also be on the land registry document as an owner, and this will trigger the new additional 3% stamp duty rule. This will have 2 impacts, first the property the child is buying will attract the 3% extra stamp duty and probably wipe out any deposit, and secondly if the parent later downsizes or moves this will also trigger the extra 3% stamp duty. Basically parents should ensure their names are NOT on the land registry documents.
Briefly owning 2 homes
If you briefly own 2 homes for example when you are selling one home to move to another but the property you are buying completes before the sale of your first home you will need to pay the additional 3% stamp duty. However you can later claim this back as long as the first property is sold within 36 months of the purchase of the second property. Originally this was 18 months and has extended.
Originally only small investors were to be liable for the 3% extra stamp duty and large investor were exempt. Now all investors regardless of size must pay the extra 3%.