It was announced in the Autumn budget last year that an additional Stamp Duty Land Tax (SDLT) charge of 3% on the entire purchase price would be made on purchases of second properties (which would include buy to let properties) for those purchases completing on or after 1^st April 2016.

The crux of the matter is whether on completion of the purchase of a property, you own more than two properties. For example, if you decide to buy a second property, in addition to your main home, to rent out or use as a holiday home then, as you will own two properties on completion, the higher rate of tax will be payable. However, to complicate matters, there is an exception to this rule.

If you already own two properties but are selling your main home and purchasing another main home then the higher rate of tax will not apply.  This will be very good news to those people who already own buy to let properties but wish to move themselves.

There may be cases where you already own a property that you let out but you do not your own main home. If you then decided to purchase your own home, as you would not be replacing your main home, you would be liable for the new higher rate charge.

So in finance terms what effect will this have?

If you were to purchase a property at £200,000, you would be liable for SDLT of £1500 but if this is a property that will be subject to the higher rate, the SDLT will then increase to £7500, an additional £6000 of SDLT as the 3% charge is on the entire purchase price!

For more detailed guidance, please see the Government's consultation document or for residential property enquiries, contact our Residential Property team.