Property Developer: Stamp Duty Explained

Property Developer: Stamp Duty Explained

One of the real stings when making money out of investment property is stamp duty, especially since the government increased this on the purchase of a 2nd property back in 2016 (both buy to lets and holiday homes count).It is often a cost that is overlooked when starting out on the investment ladder, and can really take a chunk of your profits if you have not factored this in.

The stamp duty surcharge equates to an additional 3% of the purchase price, on top of the normal rates and there is no minimum limit, i.e you are charged the 3% from the first £1.

Before the additional stamp duty: £250k house =£2,500 stamp duty

With the additional stamp duty: £250k house = £10,000 stamp duty

When Clare was In the process of buying her first investment property, she had not factored this additional cost in, as completion was due to take place before the rise took effect. However, deadlines did not go to plan and she was caught out by the additional charge. Over night her profit had dropped by over £6k!

A common misconception is that when you move home, (and you own other properties) you will have to pay the surcharge. This is not true, and as long as you are simply ‘switching’ your main residence you won’t need to pay the additional stamp duty.

The good news is that the government have now abolished stamp duty for first time buyers, buying their main residence, up to £300k. The aim of this is to stimulate the property market and help people get on the property ladder. Both of you must be first time buyers, and property abroad/inherited property is included when establishing if you qualify for the relief.

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