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News Article

Changes to stamp duty when buying a house come into force

Published 3 April 2016 by

From 1 April, the rate of stamp duty that house buyers have to pay has changed for some types of properties. Stamp duty – also known as stamp duty land tax – is a tax that applies to the sale of every home in England and Wales. Home buyers are charged a percentage of the property price once the sale has completed and in the Autumn Budget last year, it was announced that some buyers may have to pay more in stamp duty.

If you’re buying a property in the near future, find out how the changes in stamp duty land tax could affect you.

What’s changing?

Buy-to let landlords now have to pay more stamp duty than other home buyers. Stamp duty is currently charged in bands:

Purchase price Stamp duty rate

Up to £125,000

0%

Over £125,000 and up to £250,000

2%

Over £250,000 and up to £925,000

5%

Over £925,000 and up to £1.5 million

10%

Over £1.5 million

12%

You’ll only pay stamp duty on the section of the house that’s worth over £125,000 – for example, if a property costs £150,000, you’d pay just 2% stamp duty on £25,000 of the house, equating to £500.

With the new changes, buy-to-let landlords now pay 3% more on every band in stamp duty:

Purchase price Extra stamp duty rate

Up to £125,000

3%

Over £125,000 and up to £250,000

5%

Over £250,000 and up to £925,000

8%

Over £925,000 and up to £1.5 million

13%

Over £1.5 million

15%

Will I be affected?

The stamp duty changes are mainly for buy-to-let landlords so if you’re buying a property to live in, you won’t be affected. However, if you’re buying a second property – meaning in addition to a property you already own – you’ll also be affected by the higher levels of stamp duty.

This can mean you have to pay the higher stamp duty rate if your current property isn’t sold by the time you buy your new home. Don’t worry if this happens – you should be able to get a tax rebate from HMRC.

It’s hoped that the increase in the stamp duty on buy-to-let properties will free up affordable homes for first-time buyers and make it easier for young families to get onto the housing ladder. If you’re looking to save up and buy your first home, the Help to Buy ISAs could make it easier to save up for a housing deposit as your savings will be boosted by extra cash from the Government. This means that you can save up a maximum of £12,000 over four-and-a-half years, you’ll get an extra £3,000 towards your property.

Already managed to put aside your savings and you’re ready to buy your home? Make sure you’re not caught out by fraudsters with the homebuyer deposit scam.