The Stamp Duty Land Tax (SDLT) rise has finally arrived! It is a big change affecting anyone buying an additional property and even those who are simply moving house. As usual the law is pretty complicated so we have broken it down here to make it a little easier for you to digest!
What is SDLT?
SDLT must be paid by anyone buying a property or land in England, Wales or Northern Ireland, costing above £125,000 for residential properties and £150,000 for non-residential land and properties.
How has SDLT changed?
Last month higher SDLT rates were introduced for those buying additional homes, including buy-to-let properties, second homes and additional properties bought for relatives to live in.
The New Rates
Rates are charged on additional properties purchased, based on the band that the property value falls into.
Band SDLT rate
£0* – £125k 3%
£124k – £250k 5%
£250k – £925k 8%
£925k – £1.5m 13%
£1.5m + 15%
*Transactions under £40,000 are not subject to the higher rates.
Which Stamp Duty rate applies?
Here is an overview of the details that you will need to consider if you are buying another property. It is very important that you make sure you understand your situation, whether you are thinking of buying or selling.
- Selling your previous main residence within 3 years of buying your new one will entitle you to a refund on the higher SDLT rate- but you must claim it within a certain time window.
- If your spouse already owns a property and you then also buy one, you will have to pay the higher rate. However, if they then sell theirs, you may be able to get refunded.
- Parting spouses will pay the higher rate if one buys a new property to facilitate the separation. Once again, a refund may be claimed if the main residence is sold within 3 years.
- In the case of joint purchases, the higher rates will be paid if any individual owns another property, providing they are not replacing their main residence. Owning one residential property at the end of the transaction day will exempt you from the higher rate. There are however special rules which apply where there are joint purchasers and advice tailored to individual circumstances should always be obtained.
- First time buyers purchasing their first property or home owners moving from one main residence to another on the same day will be unaffected by the higher rates.
- Company purchasers of residential properties will have to pay the higher tax rate no matter what the circumstances are.
- A small share in a property which has been inherited within 3 years of a purchase will not be taken into account in determining whether a buyer is purchasing an additional residential property.
- Property owned internationally will be counted when establishing ‘additional properties’.
- Residential properties or beneficial interests in land valued below £40,000 will not be taken into account and the higher SDLT rates will not be applied.
- Non-residential properties will not be subject to the higher rates. (Mixed use properties are generally viewed as non-residential.)
- Multiple residential properties purchased in a single or linked transaction may be eligible for lower rates or tax relief.
- A trustee buying a property on behalf of beneficiaries may have to pay the higher rates, depending on several factors. They should get advice regarding their specific circumstances.
