Stamp Duty Rules Impacting Property Investments and Homebuyers

Stamp duty rules intended to limit property investment spending have caused trouble for ordinary homebuyers, who have been subject to unexpected tax bills totaling over £160m, all of which then had to be refunded.

The new stamp duty rules involving higher rates of stamp duty land tax (SDLT) were introduced in April to curb the buy to let sector, with the levy issued on those purchasing properties outside of their main residence. The new rates were three per cent higher than previous SDLT rates. However, there is potential for those attempting to sell their current residence and purchase a new one to fall victim to the fee. For example, if someone purchasing a new property found that the sale of the home they are attempting has fallen through they be subject to the higher rates of tax as they effectively own two properties.

For a buyer purchasing an average priced property (£320,168) in the South East, the higher rate SDLT could land them with a bill of £15,613 as opposed to £6,008. For someone purchasing a property in North East of England at £130,000, bills could work out at approx. £4,000 when they were expecting to pay around £100.

Personal finance specialist at Royal London, Helen Morrissey, commented: ‘HMRC’s approach to higher rate second home stamp duty risks causing severe financial hardship for home buyers. House sales can fall through for all kinds of reasons and the last thing families need is to receive a bill totalling thousands of pounds because they have inadvertently found themselves owning two properties for a short space of time. Our analysis showed that someone buying an average priced property in London could find themselves paying a bill totalling £28,000 when they were expecting to pay approximately £14,000. In the North West it can add up to more than £5,000 when you might have expected to pay only a few hundred pounds. The fact you can get a refund at some point in the future is cold comfort to having to find the money to pay the bill – how many people have ready access to such sums?’

She called for a ‘common sense’ approach: ‘It would be far better for the higher rate of stamp duty payment to fall due on the first anniversary of the completion of the purchase. By this point any delays in the sale of a home could be resolved meaning home owners won’t have the stress of finding the extra money. There would also be a massive decrease in the number of refunds HMRC would need to pay out.’

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