What do the 2016 buy-to-let Stamp Duty changes mean for buyers?

What do the 2016 buy-to-let Stamp Duty changes mean for buyers?
February 19, 2016 Rosie Williams
Stamp duty calculator

The changes being introduced in April 2016 will effect anyone purchasing a property on a buy-to-let mortgage, or as a second home in addition to their main residence. The changes will be an increase of 3% in stamp duty in addition to the current stamp duty rates (including the 0% band), meaning the stamp duty on a £275,000 house will increase from £3,750 to £12,000.

Who is affected?

Buy-to-let purchases : anyone purchasing a second property as a landlord on a buy-to-let arrangement will be subject to the stamp duty increases. This will not apply for first-time buyers who will only own one property after the transaction.

Second homes: anyone who is buying a property as a second home, whether that be for a family member, or a couple buying a home together where one is already a home owner on a different property.

Married couples or civil partnerships: for the purposes of stamp duty, married couples or people in civil partnerships are treated as one entity. This means that if one person already owns a home and they decide to purchase a second home using the spouses name, stamp duty charges will still apply on the second home (if it is not being purchased to live in).

If the property is being purchased to replace your main residence i.e. to live in, you will be exempt from the changes. However, if you haven’t yet sold your main residence at the time of the purchase, you will have to pay the stamp duty charges and be able to claim a refund if you sell the property within 18 months.

If you are already in the process of purchasing a property, you will be exempt from the charges if you complete before 1st April 2016. Alternatively, if you exchanged contracts before these changes were announced on 25th November 2016 but are unlikely to complete until after April, you should still be exempt.


What are the new stamp duty rates?

For anyone affected by the changes, stamp duty prices have increased by 3% on top of the existing stamp duty charges.


House Price Previously April 2016
£0 – £125k 0% 3%
£125,001 – £250k 2% 5%
£250,001 – £925k 5% 8%
£925,001 – £1.5m 10% 13%
£1.5m + 12% 15%


To put this into perspective, this means that a property costing £125,000 would have previously been exempt from stamp duty charges, but under the new changes this would cost a landlord £3750.

Similarly, a house costing £200,000 would have previously cost a landlord £1500 (2% of the difference between £125k and £200k) but now this will cost £7500 (3% of £125k and 5% of the difference between £125k and £200k).


Why are these stamp duty charges changing?

Chancellor George Osbourne has announced these changes in an attempt to increase supply of housing for families who are being squeezed out of being able to buy a home.

Demand for first-time-buy properties has been on the increase since the introduction of the governments help to buy scheme, as well as lower interest rates.

There are also proposals to reduce mortgage interest relief for landlords in 2017 although this has not yet come into force. The stamp duty changes will be officially announced at the 2016 Budget on March 16th, following consultation on the proposals.