In 2016 - 17, the Telegraph newspaper reported, HMRC collected a whopping £8.6 Billion from UK taxpayers through Stamp Duty Land Tax. Commonly known as Stamp Duty, the tax is paid by the buyer of a new home or commercial property or the lessee of certain leasehold properties.

More recently, the UK government introduced a relatively complex scale of tax bands aimed in large part at discouraging the purchase of second homes and property used for buy-to-let investment. Part of these tax measures included the increase in the basic rate of stamp duty for the purchase of a second home, from 1% to 3%. In 2016-17 the government raised £1.7 Billion in revenue from this increase.

Stamp Duty Changes for Buy to Let Landlords

Of course, as is frequently the case with tax laws in the UK, making provision for the inevitable exceptions to the rule simply makes things more complicated. For example, last year over 10,700 transactions where stamp duty was paid on the increased basis were eventually refunded simply because a homeowner bought another home which they intended to be their main residence, but they bought it before they had sold their first home.

In this case, the rules allow for an exemption, which seems equitable, except that it requires that the homeowner pays the full stamp duty on their new home at the punitive rate of 3% anyway. They may claim back the additional element of the tax charge if they subsequently sell their other home within three years but that means carrying a significant tax burden and negative cash flow until that time.

One thing is apparent. Your home is now a political pawn in a much bigger game and understanding how best to fund its purchase is more important now than ever.

 

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