The stamp duty sting!
Posted on 22nd May 2019 at 12:19
Since the introduction of the extra stamp duty tax for second houses and investment property, the government has raised an absolute fortune in additional revenue. So when do you need to pay it?
As mentioned in our previous blog post, the simplest way to work out whether you owe the extra 3% stamp duty is to say to yourself;
"Will I won more properties at the end of the day of completion than I did at the start?"
If the answer to this is yes then in the vast majority of cases the extra stamp duty charge is payable. There are some circumstances where this may not be the case but they are so few and far between that they are not really worth looking at! The most common question we get is about people renting out their previous property and buying their next residential property, and this is where extra stamp duty can really kick you in the stomach. Let's look at an example.
Mr and Mrs Smith own a terraced house in Leicester worth around £150,000 and want to rent that out and buy their forever home at £300,000.
If they were to sell the terraced house and buy their home at £300,000, dead simple, no extra stamp duty, so the cost would be £5,000. Not insignificant but not an absolute "wallet cruncher".
On the other hand, if they do rent out the current property, therefore owning an extra property on the day of completion, the stamp duty payable on the new home is........
A whopping £14,000! Nearly 200% more than if they sell their current home. This can really impact movers and I have absolutely seen situations where people have decided to sell instead of rent, which is exactly what the government wanted to happen.
If you are investing the numbers aren't usually quite as dramatic, as you will be buying at a lower level, but it still impacts on the costs for buying a property, that's for another day.
For more information on this and anything else relating to the housing market just give us a call on 0116 3409989 or to find out a guide on your property's current value go to http://valuation.thepropertyfox.co.uk/
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