Client Briefing – Additional Dwelling Supplement Increase

From 25th January 2019, changes to a tax applied in certain residential property sales come into effect which could impact on homeowners looking to purchase a new home while requiring to sell their existing property.

The Additional Dwelling Supplement (ADS) has increased from 3% to 4% of the purchase price of a property.  ADS is a tax applied in the purchase of a second or subsequent residential property in addition to the Land & Buildings Transaction Tax payable on the property.

While this tax primarily applies to people buying second homes or those involved in the buy-to-let market, it can also have consequences for the ‘normal’ property market.  If you are an existing home owner looking to move, unless you sell your existing property prior to completing the deal on your new property, you will be liable to pay ADS.  If your current property sells within 18 months, you will be able to reclaim the ADS.

Although ADS in applicable to any second property that sells for more than £40,000, It is important to note that the 4% ADS applies to the entire purchase price of the second property.  On a £200,000 property, this would mean £8000 ADS would be applicable.

Wallace Quinn’s Managing Director John Quinn explains,

“ADS was first introduced as a response to a perception that buy-to-let landlords were buying up property at the lower end of the market, forcing the price up and squeezing first time buyers out of the market. But where it becomes problematic for ordinary home owners is if the sale of their existing property falls through at the last minute, then they would have to find thousands of additional pounds they were not expecting and may not have available before they can complete on their new property.  Once the ADS is paid, the clock starts ticking on an eighteen month window to sell the old property or lose the right to reclaim the money paid in ADS”

Wallace Quinn clients received a full briefing earlier on this month on the changes.   If you want to discuss this further with a solicitor, please contact us for more information.