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The Law Society - Conveyancing




Buy To Let Surcharge – INVESTORS BEWARE!

In his 2015 autumn spending review, The Chancellor of the Exchequer George Osborne announced a 3% hike in Stamp Duty Land Tax (SDLT) in respect of purchases of “additional residential properties”, such as buy-to-let properties and second homes, with a value above £40,000.

The changes will apply to all completions that take place on or after 1 April 2016, but contracts that have been entered into on or before 25 November 2015 will not be subject to the new rates ( subject to normal rules about variation or assignment of these contracts).

The additional SDLT will not be payable for caravans, mobile homes or houseboats. The surcharge will also not apply to “corporates or funds making significant investments in residential property”. The proposal may require residential buyers to certify if the property they are acquiring will be their primary residence.

One temporary consequence of the SDLT increase is that it could prompt a flood of investor purchases in the short term, thereby exerting immediate pressure on an already heated market. The upside is that first time buyers – who often have to compete with the spending power of buy-to-let investors – will, in the long term, find themselves in a much stronger relative buying position.

The current rates and new rates of SDLT for additional residential property purchases are:

Band Existing SDLT rates New additional SDLT rates
*£0 – £125k 0% 3%
£125k – £250k 2% 5%
£250k – £925k 5% 8%
£925k – £1.5m 10% 13%
£1.5m + 12% 15%

*Only applies to purchases over £40,000. For purchases at £40,000 or under no SDLT return is required.

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