Wednesday's 2016 Budget has offered clarification on the stamp duty rules for people who briefly own two homes.Here, Farnworth Rose Solicitors take a look at the basics of stamp duty and what affect the latest changes will have.

What is stamp duty?

Stamp Duty Land Tax is the tax paid on the purchase of a residential property costing above £125,000.In December 2014, major changes were introduced to the way stamp duty was calculated to avoid sudden hikes in tax costs as the purchase price of property increased.Stamp duty is now charged as a lump sum based on the value of a property. A percentage is charged on different sections of the price of the property.For example, a home purchased at £400,000 would have no tax applied to the first £125,000, 2% on the next £125,000 and 5% on the remaining £150,000. This would bring the total stamp duty bill to £10,000.The full thresholds are:

• 0% on the first £125,000 of the property price
• 2% on the portion between £125,001 and £250,000
• 5% on the portion between £250,001 and £925,000
• 10% on the portion between £925,001 and £1.5 million
• 12% above £1.5 million

What were the planned changes?

In the Autumn Statement it was announced that an additional 3% of stamp duty would be charged on all second homes and additional properties purchased.The additional tax is applied to the whole value of the property and is aimed at buy-to-let landlords.With the changes set to be introduced from April, clarification on the changes had been expected in the 2016 Budget as a number of groups had been caught out by the scheme. This included parents who were putting their names on a mortgage to help their children buy a home, people buying holiday homes and people re-mortgaging their current homes to a buy to let mortgage to enable them to buy a new residential property.The additional tax would take the overall stamp duty owed on a property worth £400,000 to £22,000, more than double the original stamp duty cost.

How has the Budget affected this?

The additional 3% stamp duty charge will apply to all additional homes bought over £40,000 and there are no exemptions made for those who feel they would be unfairly affected by the charges.However, anyone who has an overlap between two properties will now have a 36 month grace period in which they can claim a refund on the additional charges. This has been extended from an originally proposed 18 months.This means that anyone who owns two homes but it is attempting to sell one, will have more breathing room to claim a refund on the additional stamp duty costs.

Speak to the conveyancing experts at Farnworth Rose

For expert conveyancing advice on buying a second home, contact the specialist solicitors at Farnworth Rose today.We can provide you with a clear conveyancing quote and provide details of any fees that may be involved in the house purchase.Call us today on 01282 695 400, or simply click the button below to receive a free online conveyancing quote.