Impact of an extra 3% stamp duty on holiday homes

It was a surprise to many when George Osborne announced in the Autumn Statement that an extra 3% stamp duty would be payable on second homes, including holiday homes. And, having read the consultation document on how it will be implemented, unfortunately many more people than originally thought are likely to end up paying the extra money if buying a property in excess of £40,000.

Although it is likely that from April 1st 2016 anyone completing on a holiday home purchase will have to pay it, it is worth remembering that the details of the stamp duty charge and any exemptions won’t be finalised until the Budget statement on 16th March, although this will be too late to take any action prior to completing on 1st April.

If you buy a holiday home today for £125,000 or less there would be no stamp duty to pay. But after 1st April, you will owe 3% x £125,000 so have to find an extra £3,750. If you buy one for £275,000 this extra bill rises from £3,750 to a whopping £12,000.

If properties are being sold specifically as holiday home deals, it may be worth trying to negotiate a reduction in price. But, if there is a lack of stock on the market, a reduction is unlikely if you are buying a second property which is not necessarily designated as a holiday home.

Also, the extra stamp duty won’t apply to all holiday homes; at the moment, those who purchase caravans, mobile homes or houseboats, won’t have to pay the extra tax bill.

With costs expected to rise, if you are considering buying a holiday home, then do make sure it’s the right thing for you. Here are five things to consider:

Tax implications

Many people don’t realise that the wealth you create from buying an extra home, especially if you get income or capital growth and on occasion your purchase can take you into a higher rate tax band. If buying abroad you may have to pay tax both there and at home, depending on the agreement with the UK.

Who will look after it?

Owning a holiday home can involve many problems, from gas to electrical and water supply issues through to damage during a storm or flood. So do make sure you have someone local who keeps tabs on the property when you aren’t there and can organise repairs.

Is it really worth it?

When I’ve thought about a holiday home, I’ve sat down and run the numbers as to whether I would save money or not and it’s surprisingly close. So unless you are lucky enough to see good income/capital growth, it may be a lot less hassle and expense to just hire the same place each year. The owner is likely to treat your booking preferentially, so worth having a chat and see what you can negotiate if there is a particular area/property you like.

Know the legals

You might only decide to buy as far as Scotland, but the legals for housing in Wales, Scotland, Northern Ireland and England can now be different from one area to another. And it gets even more complex if you buy abroad. Do your research and make sure you know how the local legal system works before handing over any cash – however wonderful the property or deal appears!

Thinking of buying a holiday home? Then contact www.propertychecklists.co.uk or call us on 01652 641722 for more information.