New Stamp Duty Charges to apply from 1 April 2016

Anyone who buys additional residential property, including second homes, buy-to-lets, houses for children etc. will have to pay an extra 3 % in stamp duty from 1 April 2016. 

This additional charge applies above the current rates. This means there will be 3% tax (currently zero) to pay on homes worth up to £125,000, 5% tax (currently 2%) on homes that cost between £125,001 and £250,000, and so on.  Homes worth less than £40,000 do not pay the additional charge.

Anyone in the process of buying a property must complete (not exchange) before midnight on 31 March 2016 to avoid the new higher rates.

The application of the new rules to buy to let landlords are quite clear – they will be caught, and note that purchases by individuals and by corporate vehicles attract the surcharge. Note however that companies holding more than 15 properties are apparently exempted.

Applying the rules to family situations is a bit trickier.  For couples living together, only one property can count as the main residence, so the purchase of a second property will trigger the charge (if the second property becomes the main residence within 18 months of purchase, by dint of the fact that the first property is disposed of a refund of the additional charge can be claimed). 

For couples not living together it may be possible to avoid the charge when a second property is purchased, assuming the properties are held in the individual names. This is a significant change, and taken together with plans to limit relief on mortgage interest may have a chilling impact on amateur landlords.