SDLT surcharge on “additional” residential properties

12 February, 2016

The 2015 Autumn Statement announced measures that will (the Government hopes) increase housing availability but potentially have a significant financial impact on private individuals who are buying a residential property.

 

One comes into force on 1 April 2016, a 3% surcharge on Stamp Duty Land Tax (SDLT) for the purchase of “additional” dwellings that cost more than £40,000, whether they are to live in or as ‘buy-to-lets’. We do not know the full details as legislation is not expected until March, but we have been given some headlines.

 

The surcharge will not apply to caravans, mobile homes or houseboats.

 

Where individuals are selling their main home and buying a new one at the same time standard rates will apply, however many other properties they own. However, those buying their main home (with no main home to sell) will have to pay the surcharge if they will still own another property (alone or jointly) anywhere in the world, whether legally or beneficially (e.g. as a beneficiary of a trust). Married couples and civil partners are to be treated as one person, so if either of them (or their infant children) owns a residential property, or even an interest in one, it will be treated as if both of them did.

 

It is not likely we will be able to choose our “main home”. Tests may include where we spend most of our time, are registered to vote, and give as our postal address.

 

The surcharge will apply to contracts exchanged after 25 November 2015 unless completion takes place before 1 April 2016.

 

Band

Existing SDLT rates

New additional property SDLT rates

£40k – £125k

0%

3%

£125k – £250k

2%

5%

£250k – £925k

5%

8%

£925k-£1.5m

10%

13%

£1.5m +

12%

15%

 

Where the sale of a main home has not completed before the purchase of another home (intended to be the replacement main home) then the higher rate will apply although a refund of the additional SDLT can be claimed as long as the original main home is sold within 18 months.

 

The proposed changes are complex and it is not possible to explain them in one simple document. If you have any doubt at all as to whether or not the surcharge is payable on a particular transaction, please contact us.

 

Examples of the residential SDLT surcharge

Price

Normal rate

Surcharged rate

Extra SDLT

£100,000

£0

£3,000

£3,000

£150,000

£500

£5,000

£4,500

£200,000

£1,500

£7,500

£6,000

£250,000

£2,500

£10,000

£7,500

£300,000

£5,000

£14,000

£9,000

£350,000

£7,500

£18,000

£10,500

£400,000

£10,000

£22,000

£12,000

£500,000

£15,000

£30,000

£15,000

£750,000

£27,500

£50,000

£22,500

£1,000,000

£43,750

£73,750

£30,000