Well there’s a question! And at the moment, there isn’t a definitive answer, so I’m going to hedge my bets and say ‘it may do’!
In the Autumn statement the government proposed a 3% increase in stamp duty for all second properties bought for over £40,000.
One of the main issues for smaller builders of this proposal is that they, unlike larger house builders, will have to pay this extra 3% charge whether they are renovating a property or building a new one from scratch. The same would apply for self-builders who stay in their current home until their new home is ready to move into.
Unfortunately it is too early to say whether this is how the stamp duty increase will be implemented. The reason we don’t know yet is because when something gets announced at the Budget or the Autumn Statement it goes out to ‘consultation’ so people like me and you can feedback our thoughts based on a Q&A from the relevant government department.
The consultation on the introduction of the new stamp duty for second homes closed on the 1st February 2016. Having read and commented on it, I do have a concern that self-builders will be charged the extra stamp duty – certainly initially. However, ‘in theory’ if you buy a plot of land with a property on it and have to pay the additional 3% rate but after 18 months you sell the first home and end up with only one property as your main home you would be eligible to apply for a refund.
The problem, despite the mountain of paperwork, comes if there is an issue with the build or for example you get sick and have to postpone building, you could miss out on the 18 month deadline to apply for a refund. I think that’s pretty unfair, which is what I have fed back during the consultation.
An alternative I have suggested is that instead of having to pay upfront, you pay the 3% charge when you come to sell if one of the properties is retained and used as an investment property.
We won’t know the impact the consultation – if any – has on the government’s decision, so we can only talk about the current proposals. The final rules of the tax won’t be confirmed until 16th March 2016 during the next Budget so watch this space for the next update.
By Kate Faulkner