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Putting the 3% Stamp Duty change into practice – Marketwatch

by: Mortgage Solutions
  • 20/04/2016
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Putting the 3% Stamp Duty change into practice – Marketwatch
The Chancellor certainly opened up a can of worms when he decided to levy a 3% Stamp Duty surcharge on second homes and buy-to-let properties, from 1 April.

No more than a day after the rules were released following the Budget announcement, questions began flying around the industry from professionals and property buyers over which investors were in or out.

Mortgage Solutions‘ readers took to their laptops and sent us emails outlining their circumstances desperate to find out if they would have to stump up an extra 3%. First-time buyers with existing investment properties appear to have come off worse than existing homeowners and even those buying and selling a main residence will have to come up with additional funds if the transactions don’t complete simultaneously.

This week our panel of brokers discuss, a month after the guidelines on the 3% levy were released, how the changes have been received by consumers and how advisers are coping with latest in a succession of Stamp Duty amendments.

Mark Harris, chief executive of SPF Private Clients, highlights the impact on borrowers who have to pay the Stamp Duty levy because the sale of the previous main residence has yet to complete.

Noel Edmonds, mortgage manager at talks about the areas tripping buyers up and what can be done to ensure they can accurately confirm the client’s Stamp Duty liability.

Dominik Lipnicki, director of Your Mortgage Decisions, considers the swathes of changes to Stamp Duty over the past few years and how that has affected the public’s understanding of the property tax.


Mark HarrisMark Harris is chief executive of SPF Private Clients

There has been some confusion among buyers around the introduction of the higher Stamp Duty rate for those buying investment properties and additional or second homes.

Some of those buying another property before they have sold their existing one have not realised that they have to pay the extra Stamp Duty and then claim it back once they have sold the old property, with a 36-month window in which to do this. This is an important point because it has to be built into the client’s cash flow, so they may have to borrow more in order to pay it. This could put them into a higher loan-to-value bracket, affecting the mortgage rate they can get.

This aside, the new rules are fairly straightforward. Mortgage brokers don’t even have to do the calculations themselves, with plenty of calculators available on websites to do all the hard work for you. We use Savills’ calculator; you simply enter the purchase price and tick the box if it is a second or additional home, and it tells you the tax due, the effective rate paid and the breakdown of the calculation.

While the ultimate responsibility for ensuring the right amount of Stamp Duty is paid lies with the solicitor, there is no excuse for a mortgage broker not being on top of this and being able to say with confidence how much Stamp Duty is due.


Noel EdmondsNoel Edmonds is mortgage manager at 

When the Stamp Duty rules came out it, the second home market was the area which needed clarification on what this meant in practice. In simplistic terms, the practice and understanding now is that the majority of cases for those completing a property transaction, where their name is already on a property title elsewhere in the UK, will fall into the surcharge category.

Outside buy-to-let, it is the second home category which clients are still struggling to grasp. Examples include the completion of an onward residential purchase prior to the sale of an existing property, or someone who has inherited property as an accidental landlord but is still trying to buy their first residential property.

With the former example, you could apply for a refund within a certain time frame, but it is the latter which is harder to navigate. We are interpreting and dealing with these as they arise. Applicants may not be fully aware of the changes and their implications, for example. Borrowers also need to consider whether they can continue with the purchase as it is, because they have access to excess funds to pay the additional Stamp Duty owed, or whether they are able to increase the loan amount to cater for the additional tax liability.

We have a panel of solicitors that we refer to when advising and looking into our clients’ Stamp Duty liabilities as we have experience with complex situations and we also ask clients to reconfirm with their own solicitors for peace of mind and a second opinion.


Dominik LipnickiDominik Lipnicki is director of Your Mortgage Decisions

Having looked at George Osborne’s record, it is not hard to see that one tax above all is messed around with at every opportunity and that is Stamp Duty.

Given the amount of times the Chancellor has tinkered with the property tax it’s not surprising the public’s knowledge over this latest change is sketchy at best.

The biggest issue is just how complicated the new 3% surcharge calculation and rules are. Quite often, the client’s initial mortgage meeting is the first time they have considered their Stamp Duty bill may be higher than they had anticipated.

Clearly the internet can help as there are some easy to use and free calculators available; for obvious reasons, the key here is to make sure that the said calculators are up to date.

Few can argue that the change in the structure of Stamp Duty away from slab to one which slices up the value of a property into bands is fairer than the previous arrangement. The eradication of the Stamp Duty hikes when the relevant bandings were crossed can only be a good thing.

However, we all know of course that the unintended if somewhat obvious consequence to this change was an increase in house prices, particularly as purchasing buy-to-let properties became even cheaper, further fuelling the market. This is why the Chancellor has tried to put out that fire by introducing the unpopular second property tax. Surely removing Stamp Duty for older borrowers wishing to downsize would have improved things. Instead we have had an announcement stating that properties worth up to £1m will be free of inheritance tax if left to children or grandchildren, encouraging people to hold on to their properties.

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