On April 1 of this year, less than three months before the much-anticipated EU referendum to be held on June 23, HMRC introduced a new tax that may affect you. The new stamp duty requires that homebuyers pay an additional 3% surcharge on top of the total sale price of a new home, if a) you already own another house in which you reside at least part of the time b) you already won another house which you earn rent from (but rent or otherwise reside elsewhere), or c) your name is on the deed to a house where your spouse or ex-partner resides.
If you’re planning to buy a house, this will add a significant amount to the total. Use this stamp duty tax calculator to figure out the original charge on your home (since it’s worked out differently depending on the price bracket your home is in). Then add 3% of the total (sale price + initial stamp duty). As an example, let’s take the average price of a house in the UK, now around £265,000. The amount of stamp duty payable by a first homebuyer on a house of that price is £3,250, bringing the total up to £268,250. Add on another 3% to that figure gives £276,297.50. That’s a total of £11,297.50 in stamp duty. Ouch! Use this mortgage calculator to see how much that extra £11,297.50 will realistically cost you over the term of your repayment.
If, in the example above, you’re buying an investment property or a second home, you’ll be paying around £3,350 more in stamp duty than you would have previously. But this extra surcharge is part of a sweeping reform that means the majority of home-owners, who are either buying their first home or moving house, will actually be much better off. If you buy a house for £265,000 today, and that house is your only piece of residential property (or will be once you sell of other owned or partly-owned properties), then you will only pay the £3,250 in stamp duty. So first-home buyers and people moving house will save about £3,700.
Whether you’re about to buy your first home or your fifteenth rental property, the new stamp duty charge means that your mortgage repayments are going to be different than they were before April 2016. If it’s been a few months since you reviewed your options, it might be time to take another look at possible mortgages.