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Higher Stamp Duty Land Tax (SDLT) Charges for Second Homes

View profile for Amanda Payne
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You may already be aware that in its Spending Review and Autumn Statement published in November 2015 the Government announced its plans, in certain circumstances, to introduce a higher rate of Stamp Duty Land Tax from the 1st April 2016.

Proposed Stamp Duty Land Tax changes

These proposed changes were part of a Consultation which ended on the 1st February 2016. Once the Government has considered all responses, it will confirm its final policy in the Budget on the 16th March 2016.

The Government is committed to supporting home ownership, the higher rates of SDLT forms the latest part of the initiative. The higher rates of SDLT will apply if, at the end of the day of the transaction, you own two or more residential properties and are not replacing your main residence. Therefore purchases of additional residential properties in England, Wales and Northern Ireland will generally be subject to the increased rate.

Companies purchasing a residential property (including a first purchase) will also generally be required to pay the higher rate. The vast majority of transactions will be unaffected for example; first time buyers purchasing their first property, or home owners moving house from one to another.

Where another property is owned globally, a property purchased in England, Wales or Northern Ireland may be classed as an additional property. This means that if someone is purchasing their first or only property in England, Wales or Northern Ireland, but already own property outside of these areas, they may pay the higher rate of SDLT.

Married couples and civil partners living together, will be treated as one unit. This means that an individual buying a property may be liable for the higher rates if his or her spouse or civil partner has an existing residential property. If the spouse or civil partner then sells that residential property they may be able to claim a refund.

If the proposals as set out in the Autumn Statement are implemented, the higher rate will be 3 percent higher than the current SDLT rate (see chart below).

New SDLT Rates

The higher rates will only apply to purchases of additional residential property which complete on or after 1 April 2016. If contracts were exchanged after 25 November 2015 then the higher rates will apply if the purchase is completed on or after 1 April 2016.

However, if contracts were exchanged on or before 25 November 2015 but not completed until on or after 1 April 2016, the higher rates will not apply.

BandExisting SDLT ratesNew SDLT rates
£0* – £125,0000%3%
£125,001 – £250,0002%5%
£250,001 – £925,0005%8%
£925,000 – £1,500,00010%13%
£1,500,000 +12%15%

*Transactions under £40,000 do not require a tax return to be filed with HMRC and are not subject to the higher rates.

The most common scenario where the higher rate will be charged is where there is a purchase of a buy to let or second home in addition to a main residence which completes after 1st April 2016. An exception to this will be where the property being purchased is replacing the individual’s main residence. Where the sale of a main residence has not completed at the time of the purchase then the higher rate will apply although a refund of the additional SDLT can be claimed as long as the main residence is sold within 18 months.

For more information visit https://www.gov.uk/government/consultations/consultation-on-higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties.

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