Higher Stamp Duty Rates for Additional Residential Properties

As part of the government’s commitment to supporting home ownership and first time buyers it intends to introduce higher rates of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties.  The most common scenario in which purchasers will pay the higher rates is where they are purchasing a buy-to-let or second home in addition to their main home.  From 1st April 2016 the following higher rates will apply to the purchasers of additional residential properties:

 

Band Existing residential SDLT rates New additional property SDLT rates
£0* – £125k 0% 3%
£125,001 – £250k 2% 5%
£250,001 – £925k 5% 8%
£925,001 – £1.5m 10% 13%
£1,500.001 + 12% 15%

 

h*Transactions under £40,000 are not subject to the higher rates.

The higher rates will not apply if, at the end of the day of the transaction, an individual owns only one residential property, irrespective of the intended use of the property.

If, at the end of the day of the transaction, an individual purchaser owns two or more residential properties, whether the purchaser pays the higher rates or not will depend on whether they are replacing their main residence. The higher rates will not apply if, at the end of the day of the transaction, an individual owns only one residential property, irrespective of the intended use of the property.

Married couples and civil partners living together will be treated as one unit and may only own one main residence between them at any one time for the purposes of the higher rates.  Therefore, an individual buying a property may be liable for the higher rates if his or her spouse or civil partner has an existing residential property.

Where two or more people purchase a property jointly if, at the end of the day of the transaction, any of the joint purchasers has two or more properties and is not replacing a main residence, the higher rates will apply to the entire consideration for the transaction.

Property owned globally will be relevant in determining whether a property purchased in Northern Ireland is an additional property.  This means that if someone is purchasing their first or only property in Northern Ireland, they may pay the higher rates if they own property outside of Northern Ireland and are not replacing their main residence.

The first purchase of a residential property by a company or a collective instrument is subject to the higher rates of SDLT.

If within 18 months of purchasing a new main residence an individual sells their old main residence, they will be entitled to a refund on the higher rates paid.

Should you require any advice in relation to the above please do not hesitate to contact Aleric Turtle at aleric.turtle@mtb-law.co.uk or by calling 028 9032 9801.