Is there higher stamp duty on second home purchases?
How much more tax will I pay if I wish to buy a second home? This is a question many people ask when contemplating buying a second property. Well, the tax they are referring to is stamp duty.
Stamp duty is something everyone who buys land in England, Wales or Northern Ireland must pay. It is often referred to as Stamp Duty Land Tax (SDLT).
When is stamp duty payable on property? Most people who buy a house in England, Wales or Northern Ireland will have to pay stamp duty, but there are some exceptions to this rule. There is no SDLT to pay on houses worth less than £125,000. Once this threshold is reached, the tax goes up in stages. However, if you wish to buy a second property you will have to pay a higher stamp duty on it.
In April 2016, the government imposed an extra 3% stamp duty surcharge on second home purchases. This extra 3% is on the total price of the house, and no allowance is made on the initial £125,000.
The higher rate of stamp duty is applied to any property not used as the owner’s main residence. In other words, the higher rates apply to holiday homes and buy-to-let properties.
This means if you want to buy a house or flat priced at £250,000 as your main residence, you would pay the standard SDLT of £2,500. However, if you wish to buy the same property as a second home or a buy-to-let property, you would pay a higher rate of £10,000.
Another example of how the extra tax affects second property prices is on a house valued at £450,000. Purchased as your main residence you would pay £12,000 in SDLT, while purchased as a second property you would pay £26,000.
Although the higher duty on second properties appears unfair, it should not discourage people from buying their second property in an area such as Islington or Stoke Newington. Both of these areas have a wide range of properties for sale or rent, and both have much to offer people who want to live close to the heart of London.
There is no shortage of theatres, restaurants, clubs and bars in either area. The excellent transport links in Islington and Stoke Newington mean you are only ever a short distance from the bars and clubs of Shoreditch or the theatres and restaurants of the West End. These transport links make for a quick and easy commute to destinations like the West End or Old Street.
Despite the stamp duty increases, Islington and Stoke Newington are ideal locations if you want to buy a property to live in or as an investment.
For more information on properties for sale in Islington or properties for sale in Stoke Newington, contact us today.