Summary for Residential & Commercial property

The budget announced on March 16th was none too exciting. There were some changes announced to Commercial Stamp Duty rates which sees anyone buying at around £1 Million or less saving a few quid in tax and the results of the consultation on stamp duty for second homes was announced.

Buy to let landlords that were hoping for some reprieve in the previously announced tax changes were left disappointed. From 1st April 2016 Stamp duty will increase by 3% on each banding and is applicable to those who will own more than one property worldwide on completion of that transaction. This mainly affects those of you buying a buy to let, moving home without selling the existing (although you now have 3 years to sell and get extra stamp duty back) and those of you looking to buy a second home for yourself or a dependant relative.

Stamp Duty Calculators:

Standard Rate Residential Stamp Duty.

More Than One Residential Property Stamp Duty.

New tax changes in practice.

I helped a client last week that lives abroad and is looking to buy a property jointly with their daughter in the UK, this was in order to use their joint income. The lenders that will lend insist both are on the mortgage and both are on the title deeds so he will be hit with an extra £9,000 in stamp duty.

I also spoke to a client that is not married but lives with his partner. He owns in London and they wish to buy jointly a property in Devon as a holiday home. As the couple are not married I found a lender to lend 80% on a joint mortgage sole title basis which means the property will only be registered at land registry (currently in process of being privatised) in her name and thus I have saved them around £6,000 in stamp duty!

Large Corporate Landlords

The Chancellor had indicated that large companies or individuals may escape the extra stamp duty if they own 15 or more properties. But, alas it was not to be, as after consultation ending in February and announced last week in the budget, the large portfolio landlords will not escape the extra stamp duty rates.

Niche way to escape extra stamp duty!

But wait, there is a way to escape the increased stamp duty rates. All you need to do is buy 6 properties or more together, simple.

For property transactions consisting of 6 or more residential properties you will now pay commercial stamp duty rates. Commercial stamp duty rates changed in the budget and are now:

  • 0% to £150,000
  • 2% Between £150,001 and £250,000
  • 5% above £250,000

(These new rates mean that buyers of commercial property worth up to £1.05 million will pay less in stamp duty).

So if you plan to buy 6 flats for £250,000 each you would pay £138,750 in stamp duty if you brought them all individually (thus paying the increased stamp duty of 3% on each banding) but as you are going to buy all 6 in one transaction then they fall under commercial stamp duty rates and the tax bill is a much more manageable £64,500. So there you have it property investors – rather than buy 1 flat, buy 6 flats.

Finally, I will end with part of the budget that brought a smile to my face. Here is an excerpt from the Government website. For all of you lending power tools to friends for a small fee or allowing someone to keep items in your garage or loft some good news……

‘From April 2017, there will be two new tax-free £1,000 allowances – one for selling goods or providing services, and one on income from property you own.

People who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income.

In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free.’

Anyone want to use my Makita Combi Drill?

Blog and views of Wesley Davidson. e: wesley@foxdavidson.co.uk