Higher rate Stamp Duty Land Tax (“SDLT”) for additional properties


Written by: Nimesh Shah

At the 2015 Autumn Statement, the government announced a package of measures focused on providing low-cost home ownership for first-time buyers.

One of the measures was to introduce a higher rate of SDLT applying to purchases of additional residential properties, such as buy-to-let properties and second homes. The new charge will add 3% SDLT to the current rates for residential properties and will take effect from 1 April 2016.

From 1 April 2016, a second property purchase of £500,000 will cost £30,000 in SDLT, which is double the charge under the current rules.

A consultation document regarding the new SDLT charge was published in late December 2015, with responses from interested parties required by 1 February 2016. Whilst the exact application of the new SDLT will not be known until the 2016 Budget, the consultation paper outlines the proposals.

Crucially, where the exchange of the property occurred before 26 November 2015, but completion is after 1 April 2016, the new SDLT charge will not apply. This will be particularly relevant for any ‘off-plan’ purchases which do not complete until after 1 April 2016.

Where someone is replacing their main residence, and there is an overlapping period where they own two properties (because they are unable to sell their previous home), the additional SDLT will initially be payable but will be refunded if the previous home is sold within 18 months. There will obviously be a cash-flow disadvantage in this situation and individuals moving homes will need to consider how they will fund the additional SDLT.

Married couples (and those in a civil partnership) are only entitled to one main residence between them. If either partner owns a property before acquiring a main residence, the purchase of the main residence will be subject to the higher SDLT.

It is important to note that overseas properties will count for the purposes of determining whether the additional SDLT is payable. Therefore, individuals relocating to the UK and wanting to purchase a home could face the higher SDLT cost if they already own a property in their home country.

For property investment businesses, the government is considering introducing a relief from the higher SDLT, recognising the positive economic benefits property developers and investors have on the housing market. In the consultation document, the government suggest a ‘bulk’ purchase of 15 or more properties would not attract the new SDLT charge. The further details on how and when any relief could apply should be made available following the consultation.

Individuals and property businesses in the process of acquiring residential property should aim to complete any transactions before 1 April 2016 to ensure the higher SDLT does not apply. For property businesses, there are a number of unanswered questions over how they will be affected by the new SDLT charge and whether any reliefs will be available, and this will only become clear after the 2016 Budget.

For more information, please contact your usual Blick Rothenberg contact or Nimesh Shah on +44 (0)20 7544 8746 or at nimesh.shah@blickrothenberg.com