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2016 Budget News

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Wed 16 Mar 2016

2016 Budget News

Following the BudgetTelegraph Money looks at the basics of stamp duty and today's relaxation in the rules that affect people who briefly own two homes.

What is it?

Stamp Duty Land Tax is a tax levied when you buy property worth more than £125,000 (residential properties) or £150,000 (non-residential land and properties).

It’s charged as a lump sum, using a tiered system based on property value. Different percentages are charged on different sections of a property's price. 

For instance, for a £500,000 house, there would be no tax applied to the first £125,000, 2pc applied to the next £125,000 of the value and 5pc applied to the remaining £250,000. The total bill would be £15,000.

In Scotland the system is very similar, but is called the Land & Buildings Transaction Tax, which comes with different banding thresholds.

 

What was already changing?

In the Autumn Statement, it was announced that an additional three percentage points of stamp duty would be introduced from April on all second homes and additional properties being purchased.

This additional tax applies to the whole value of a property, and is aimed at buy-to-let landlords.

Some clarifications had been expected in the run-up to the Budget, as a number of groups have inadvertently been caught out, such asthose with a holiday home abroad and those trying to help out their children.

With this additional tax, the total bill for a £500,000 property would be £30,000, double what it was before.

What happened to stamp duty in the Budget today?

The extra three percentage points of stamp duty will still apply to additional homes, and there have not been any exemptions made for those groups who felt unfairly caught out.

However, the grace period during which those who have an overlap between two properties can claim a refund on the higher rates has been extended to 36 months, from an originally proposed 18 months. 

That means that people who end up with two homes but are trying to get rid of one will get some breathing room. 

Previously it was thought that corporate investors might be able to avoid the new charge, but the Budget document has made clear that the higher rate will apply "equally to purchases by individuals and corporate investors". 

Jeremy Leaf, former chairman of the Royal Institution of Chartered Surveyors, said: "As it stood, the 3pc stamp duty hike from April unfairly favoured large investors at the expense of smaller landlords.

"In announcing that the new stamp duty rates on additional properties will apply to larger investors too, the Chancellor has balanced it so it is not helping either group, but in doing so he compromises the chances of improving supply."