Stamp Duty Land Tax

HM Treasury have launched an open consultation regarding their proposals to introduce higher rates of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties.

The higher rates will be 3 percentage points above the current SDLT rates, and will take effect from 1 April 2016.

Points to note

  1. The higher rates will also generally apply to purchases of residential property by companies.
  2. The intention is that the vast majority of transactions, such as first time buyers purchasing their first property or home owners moving from one main residence to another will be unaffected.
  3. The government is considering an exemption from the higher rates for those making significant investments in residential property, given the role of this investment in supporting the government’s housing agenda.
  4. If you own 2 or more residential properties at the end of the day of the transaction you will be liable for SDLT at the higher rate, but see the rebate provisions in 5 and 6 below.
  5. You will get refund of the additional tax payable if the additional purchase is of a main residence providing the original main residence sale takes place within 18 months of the sale of the additional main residence.
  6. Relief is also available where a person who is already the owner of a second residential property such as a buy to let sells his main residence but does not immediately buy a main residence. When he does buy a second residence within 18 months of sale of original residence the higher rate will not apply.

    It will be a question of fact whether a property is treated as a main residence.
  7. Joint buyers are treated harshly in that if as a result of the acquisition any of the joint purchasers have 2 or more residential properties and is not replacing a main residence the higher rate applies to the entire acquisition. This applies even if one of joint purchasers is that person’s first property.  Married couples and civil partners living together will be treated as one unit for ascertaining whether an additional residential purchase has been acquired, unless at time of additional purchase they are separated under a court order or formal deed of separation.
  8. Even though property outside England and Wales and Northern Ireland is not subject to SDLT property owned globally will be relevant in determining whether a property purchased in England or Wales is an additional residential property.  Inherited property is also taken into account.  Accordingly if a first time buyer inherits a relative’s foreign holiday flat “the first time purchase” in England and Wales will be an additional residential property.
  9. Exemption from higher rate was initially proposed for corporates or funds owning more than 15.  It is up for consultation whether the exemption should apply to individuals.