Stamp Duty Land Tax ‘Cupid Tax’

As of April 1st 2016, the Stamp Duty Land Tax will be increasing 3% for those planning on buying an additional residential home in England, Wales and Northern Ireland. For those who own or are planning on buying a second residential home, they will find themselves paying up to 5 times as much as a first-time buyer in stamp duty land tax.

For example; A first-time buyer purchases their first residential property costing £200,000. They will incur stamp duty taxes amounting £1,500. The first £125,000 being tax free and the remainder of the house price, £75,000, incurring a 3% stamp duty tax. Whereas if a landlord invests in an additional residential property at the same price, they will incur 3% stamp duty on the first £125,000 and then an additional 5% on the remainder of the house – a stamp duty tax of £7,500.


*This table shows the comparable costs associated with additional residential property purchases, to be introduced on April 1st, 2016*

The Association of Tax Technicians (ATT) has warned that the new stamp duty could be unfair for married couples and civil partnerships. The government suggests such couples are considered one unit, therefore they will fall victim to the imposed stamp duty increase. Couples who are cohabiting will not be affected.

The rise in stamp duty not only affects landlords and married couples, it will also impact first-time buyers too. For those who can’t afford to buy their home on their own and intend to jointly purchase their first home with their parents, if their parents own a residential property, the increased stamp duty rates will be imposed as standard.

If a home owner chooses to replace their main residence they will not incur increased costs. The chart and example scenarios below show how the new stamp duty tax can affect residential property owners:

stamp duty

Example A

Holly bought her first property, which she now rents. After the revised stamp duty rates, Holly purchased another property to be used as her main residence. She will not incur additional charges as she does not own 2 residing properties.

Example B

Tim owns 2 properties, one of which is his main residence. At one point in the process of selling and buying his main residence, he owned a total of 3 residential properties whilst he waited for contracts to be exchanged on a ‘given transactional day’. Tim was liable for paying the increased stamp duty rates. However, if his first main residing property is sold within 18 months, he can claim a refund for the higher rates paid.

Example C

Sarah owns 1 residential property which is used as her main residence. She purchases a new residential property and decides to rent her existing property. Although Sarah has changed her main residential property, she will incur higher rates as she owns two residential properties at the end of the transactional day.

It is important to note that portfolios consisting of over 15 properties are exempt from these new rate changes.

This information has been extracted from the, if you want to read more on the changes please click here.

Adler Insurance

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