By the Dart • Legal Corner LEgAL CoRNER
By Simon Wilson, Partner, Dartmouth Office, Wollen Michelmore Solicitors Increase in Stamp Duty on Second Homes
t
he beautiful coast and tranquil countryside of south Devon has long been a haven for buyers of second homes but this may soon be under
challenge by the proposed increase in stamp Duty Land tax (sDLt) due to come into effect on 1 April 2016 when an additional 3% sDLt will be payable. this will apply for all second homes or “Buy-to-Let” residential properties for a price above £40,000.
the tax is to apply on a purchase where the buyer
owns any other property (anywhere in the world) either as his sole home or jointly with a husband or wife or civil partner. this also applies to companies and where the buyer may have a beneficial interest in another property under a trust. this could, therefore, apply where a parent purchases a property jointly with an adult child where a lender may have insisted that the parent has to be a party to the mortgage.
A Zoopla property search will confirm
that there are currently no qualifying properties for sale in south Devon below £40,000, save for a handful of mobile homes! Fixed mobile homes and houseboats are exempt from sDLt in any event.
of the new home and then the excess tax can be reclaimed if the old house is sold within the 18 month period. the Government are, however, consulting as to whether the additional tax is to be paid on completion of the new house or after expiry of that 18 month period.
the Government’s stated aim for these changes there is a
was that both “Buy-to-Let” landlords and wealthy foreign investors have driven up the cost of home ownership beyond the means of many uK property owners. Indeed, the median house price for salcombe in 2014 was 20.4 times the national Average salary of £26,500 and 12 times salary in Dartmouth.
concern that the established
market for second homes will be
severely curtailed by the changes
thus, a property purchased for £40,001 to £125,000 (which is currently exempt from sDLt) will attract 3% tax on the whole purchase price. the 3% increase is also applied across all the current property value bands for sDLt.
It is proposed that large scale bulk purchases by
investment funds or corporates may be exempt from the higher rate on the purchase of 15 or more properties, or possibly, where they have an existing portfolio of 15+ properties.
At the moment, the existing Multiple-Dwelling
Relief open to an investor who buys 6 or more dwellings in a single transaction will not be affected by the proposed changes.
the consultation document states that there will
be sDLt Relief on the purchase of a replacement main residence, provided that the owners sell their existing house 18 months before, or after, the purchase of the new home. However, the original proposal was that the additional 3% sDLt would need to be paid on completion of the purchase
Aside from whether the likes of Roman
Abramovich will be deterred from buying a river view pied-á-terre in the south Hams, what are the practical implications for us in this area?
In the short term, property
professionals and current buyers are obviously rushing to complete transactions before 31 March 2016 deadline but there is a concern that the
established market for second homes will be severely curtailed by the changes. the market for “Buy-to- Let” property is already suffering from the previous restrictions on mortgage lending.
However, with current low interest rates, investors will still look for the potential higher return from rental income as well as potential capital growth. the nationwide House Price Index in December 2015 showed a 3.8% annual increase in south West house prices,, with a prediction of a u.K. house price rise of 3% – 6% over the next 12 months. therefore, a 3% additional purchase cost may not dent the second homes market in the long term.
the information in this article is based on HM
Government’s consultation document published on 28 December 2015. the first draft of the proposed legislation will not be published before the 16 March 2016 Budget and the above provisions may change when the legislation is implemented, only 2 weeks later!
For more information about this article, please contact Simon Wilson on 01803 396604 or email him at
Simon.Wilson@wollenmichelmore.co.uk
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