Downsizers get a stamp duty break

OLDER people who downsize to a smaller home before selling the original property have been given a reprieve.

Thousands faced a new 3 per cent stamp duty charge from April because they will be classed as second-home owners at the moment they buy. But they now have three years to sell their old home and claim back the charge. It was originally thought they would have just 18 months.

The charge is part of new stamp duty rules coming in from April 1 for people who buy second homes. It will add thousands of pounds to the cost of buy-to-let homes and holiday properties.

It was designed to help first-time buyers compete with landlords but experts feared the proposals would also catch out those unable to sell before they buy.

Allowing homeowners three years to claim back the money helps those selling in difficult circumstances, such as people affected by flooding, going through a divorce or suffering ill-health. On a home costing at £300,000, they would pay an extra £9,000 stamp duty under the levy.

David Hicks, director at tax experts Deloitte, says: ‘The 3 per cent stamp duty is bad news for movers who can’t sell their old home – so it’s good that Government has doubled the time they have to sell and claim back the tax from that originally proposed.’

The higher rate is aimed at buy-to-letters. HM Revenue & Customs estimates that 160,000 property purchases in 2014/15 – 13 per cent of the total – were for second homes and buy-to-let properties.

Stamp duty for normal buyers is zero on the first £125,000, and 2 per cent on the next £125,000. It continues to rise, with homebuyers eventually paying 12 per cent on the cost above £1.5million. But second-home owners will pay 3 per cent more, starting at 3 per cent on the first £125,000 and rising to 15 per cent on £1.5 million-plus.