‘Govt’s new Stamp Duty rules are now unfairly penalising ordinary owners’ !
When a higher rate of stamp duty was announced by the Chancellor last November, it was meant to cool the boom in buy-to-let. Under the new rules, applying from April 1 this year, anyone buying a property who already owned another property would pay the usual rate of stamp duty – plus a three percentage point surcharge.
This means a buyer’s tax bill could increase by thousands of pounds.
For example, on a property worth £300,000, the charge would increase from £5,000 to £14,000.
George Osborne’s intention was to deter property investors and leave more property free for young families.
But the rules are having unexpected consequences for many. These are people who don’t put themselves in the same bracket as buy-to-let investors, but who nevertheless have discovered that they will have to pay the extra amount when they move, buy a family home or downsize.
The holiday-home downsizer
Carolyn Andrews, 69, lives in Bournemouth but goes to Hastings every couple of weeks to look after her two young grandchildren. She owns another property there.
She used to live in the area, so being able to visit is important to her social and family life. But her cottage will not be suitable for long. “I’ve been thinking about moving – the cottage has steep stairs – but the tax will put such a lot more on the cost,” she says.
Ms Andrews reckons that without the tax she would move into a smaller property, freeing up the cottage for a family who could make better use of it. But the tax prevents this.
“I’m very disappointed because this new tax happened so fast. If I’d had a warning, I would have made a choice, but now the choice has been made for me,” she says. She is likely to keep it.
The homeowners who can’t sell
David and Sarah Crouchley, aged 64 and 57, live in Carlisle, which was badly hit by last winter’s flooding.
They are moving to a new house close to a church that Mr Crouchley, a retired Methodist minister, has been asked to oversee part-time.
The couple have struggled to sell their home, and so were advised by estate agents to let it out instead.
But they were shocked to find that stamp duty on a potential new property would be £8,500 instead of £1,500.
Because of the floods there’s no demand in the sales market,” he says. “But there are hundreds of people whose houses have been flooded who need somewhere to rent, so there’s lots of demand in the rental market.”We’re rethinking the situation because if I’m going to have to pay £8,500, half my salary will disappear.”
The first-time-buyer with a home-owning partner
Sophie Hawkins, 23, is a newly qualified teacher from Cambridge. She and her boyfriend Jeremy Smith, 40, want to buy a house together. But despite the fact that Sophie has never owned property, she would have to pay the surcharge on her first home – because Mr Smith owns his home.
He wanted to keep the property because the garage, which has been converted into a gym, is essential to his work as a personal trainer.
But the couple are now considering selling his home to avoid the higher duty, which would push up their tax bill from £7,500 to £18,000.
She says: “The higher stamp duty bill would be pretty much equivalent to my annual salary. Renting in Cambridge is very expensive, so it makes sense to buy – what we’d be paying in mortgage repayments is what I’d pay to rent a single room.
“We knew about the higher tax but didn’t quite realise how it would affect us.
“The Government said it was for buy-to-let landlords so we didn’t think it involved us at all.”
The family that have never lived in their home
The Jermy family, from Shropshire, illustrate a common problem with the new surcharge. Stuart Jermy is a vicar, and the family currently live in a church-provided home.
Unfortunately, they also own a holiday property, inherited from a family member, in which they have never lived. They are unable to downsize the property that would become their main home without being hit by the new surcharge.
The Jermys would be able to sell the property, in Truro, and pay the standard rate of stamp duty to buy a new one if they had lived there – a condition that many buyers do not know about (see box left).
Liz Jermy says: “It makes a mockery of the rules. Someone who has loads of properties can sell and buy their own home repeatedly – but we can’t. We’ve done the responsible thing and kept a home as security. But people like us find that they are coming into retirement and realising they’ve got nowhere to live.”
and here’s one who won’t have to pay – a buy-to-let landlord
One buyer who has escaped the extra tax on her own home is Shirleyann Haig, 39, who, with her husband Matt, 37, owns 17 buy-to-let properties.
The mother-of-two thought she would have to pay the extra tax when she finally buys a home for the family to live in. At the moment the couple rent a home on the Wirral, but they are buying a family home after a series of work-related moves.
The couple discovered that they are exempt from the extra stamp duty because of a passage in the consultation document that gives anyone who sold their home before the stamp duty announcement in November 2015 three years to buy a new home, paying the lower rates.
To qualify, the buyer has to have owned their own home at some point in the past – and lived in it.
The news is a “massive relief “, says Mrs Haig. “This means that people who’ve had to move around, perhaps for work, and don’t own their own home, don’t have to pay a huge tax bill.”