The government believed that making residential property more expensive would discourage investors but has done little to affect the property market. Find out why there has been a spike in tax revenues and how stamp duty land tax will affect you.
On 6 April 2016, the government introduced the three per cent surcharge for the purposes of stamp duty land tax. The surcharge also applies to the Scottish and Welsh equivalent of SDLT. The provision was seen to be an attack on the buy to let market and also those people buying second homes.
The government believe that by making the purchase of residential property more expensive, investors will be discouraged; helping to reduce house prices and increasing the availability of the housing stock to first time buyers. In practice, it simply resulted in a spike in tax revenues and has done little to effect the property market, other than maybe at the top end.
The surcharge has thrown up a number of anomalies. Certain individuals who thought that they may be exempt from the three per cent surcharge because they’re buying their first home found that they were actually liable due to the fact that they had a previous buy to let property or alternatively may have had a residual interest in a property with a previous partner.
In complex cases, there’s anecdotal evidence of people simply paying the surcharge rather than delaying a completion while matters were being clarified. Divorce cases in particular can produce some unusual situations which need to be carefully navigated through.
So, what should we do about the surcharge? Well, first of all, never assume that its payable and never assume that it’s not payable, always take advise at an early stage . For instance, buying a property via a trust can in certain circumstances bring exemption from the surcharge. This can be particularly attractive for parents buying property for their adult children but still being able to maintain some control over the asset itself.