The Budget announcement yesterday brought us a gift, a new stamp duty charge for second homes in the UK.
Those of you struggling to get on the property ladder (or stool in my case), may have come near a stroke when you heard about an extra charge for those who have second homes.
Yes, you heard it right, an extra 3% on top of existing rates for those having second homes. This means that if you try to buy a property at £550k (not much in London), and you own another property, your stamp duty will jump from £17.500 to £34.000 on April 1st. How is that for an April’s fool joke? Only it isn’t a joke.
Are you subject to the tax if you own a home in the village in Greece (inherited) or a small holiday flat in Spain?
There is a lot of contradictory information out there, HMRC says:
If, at the end of the day of the transaction, an individual owns 2 or more properties and has not replaced their main residence, the higher rates will apply.
There are however conditions
Condition C – the purchaser owns an interest in another dwelling which has a market value of £40,000 or more and is not subject to a lease which has more than 21 years to run at the date of purchase of the new dwelling; and
Conditions D – the dwelling being purchased is not replacing the purchaser’s only or main residence.
If you are permanently resident in the UK, in rental accommodation which is your permanent home and are trying to buy, it looks likely you will be caught by this.
Should you have that stroke then? Not just yet. Are you sure your Grandma’s flat is worth more than 40k? Perhaps not. How do you prove it? Will HMRC ask say the Greek tax office that works on property valuations from 10 years ago that are now 40% above market value? Or can you ask a local estate agent?
I have my team of lawyers looking at this and will let you know as soon as I hear anything useful. Look at the bright side, this change will ruin what is left of the buy-to-let market, which may bring prices down a notch.
Good house hunting!