Stamp Duty Land Tax (SDLT)

Additional Residences

From 1 April 2016 higher rates of SDLT will be charged on purchases of additional residential properties, such as second homes and buy-to-let properties. The higher rates will be 3 percentage points above the current SDLT rates.

Why are the changes being made?

The aim of the change is to make the buy to let market less attractive and to re-focus support for housing towards low cost home ownership for first time buyers.

What are the changes?

There will be a 3% SDLT surcharge made on purchases of second homes.  The table below shows the existing and new rates that will apply.

For example the amount of SDLT payable on a £200k second property prior to 1st April 2016 is £1,500 (0% x £125k plus 2% x £75k).  From 1st April the same transaction will attract an SDLT charge of £7,500 (3% x £125k plus 5% x £75,000).

Who is affected?

In short, anyone buying a second home that isn’t their main residence.  Whilst primarily aimed at the buy to let market it also catches parents wishing to buy property for their children and couples buying properties together where one or both already own a property that they are not intending to sell.  Even a first time buyer in England and Wales will be caught if they already own a property abroad.

The Government consultation provided the useful flow chart diagram replicated below to check whether a property transaction will be affected by the changes.

Stamp Duty - 2nd home

There are some exceptions.  The new SDLT charges will not apply to:

  • caravans;
  • mobile homes;
  • houseboats; or
  • properties worth less than £40,000.

In addition charities and registered social landlords will be excluded as will companies already owning 15 or more properties.

Are there any work arounds?

It appears that the Treasury has tried to close any possible loopholes.  Whilst it is possible to sell an existing main residence and buy a new one whilst already owning a second property without incurring the surcharge, the practice of ‘flipping’ a main residence will be scrutinised.  This is where you state that the property you wish to sell and replace is your main residence when it is not.  The treasury will consider a number of different factors when considering what is defined a main residence including, but not limited to:

  • where the owner and their family spend their time;
  • where any children go to school;
  • where the owner is registered to vote;
  • where the owner works.

The treasury will also treat married couples, civil partners living together and non married cohabitees as one unit.  This prevents a second property being purchased in the other partner’s name.  It also means that any homes owned by either partner will be included when deciding whether the new charges apply.  Therefore a couple buying a first home together will be caught if one of them already owns a property that they are not selling.

What if I have bought a new main residence but cannot sell the old one?

If you are able to purchase a new home but cannot sell the old one at the same time you will have to pay the additional SDLT.  However, if you sell the old main residence within 3 years you can claim the additional SDLT back.

If you would like further information or advice please contact Anthony, Natalie, Catherine, KarenAmy or Michelle on 01752 668246 or send an email by clicking here. Alternatively you can obtain an online conveyancing quote by clicking on the button at the top of the page.

Anthony Longville
Natalie Barham
Karen McCormick
Amy Paterson
Michelle Pepper