INDUSTRY NEWS MARCH 2016
STAMP DUTY LAND TAX – RESIDENTIAL PROPERTY – NEW RULES
From the 1st of April 2016 the higher rates of Stamp Duty Land Tax (SDLT) will apply to additional residential properties purchased in England, Wales and Northern Ireland. The higher rates will be 3 percentage points above the current SDLT residential rates. They will be charged on the portion of the value of the property that falls into each band as follows:
- £0 – £125,000: 3%
- £125,001 – £250,000: 5%
- £250,001 – £925,000: 8%
- £925,001 – £1,500,000: 13%
- Over £1,500,000: 15%
In order to understand whether you need to pay higher rates of SDLT, you need to answer the following question irrespective of the intended use of the property whether it is an additional property for your personal use or a buy-to-let: «How many properties do you own at the end of the day of the transaction?».
If on completion of the transaction you own two or more residential properties, whether you pay the higher rates or not will depend on whether you are replacing your main residence. If you sold your previous main residence within 18 months prior to the day of the transaction and the transaction is a purchase of a new main residence, you will be considered to be replacing your main residence. In these circumstances, the higher rates of SDLT will not apply. You might be eligible for a refund from HM Revenue & Customs if you paid higher rates of SDLT but sell your previous main residence within 18 months from the purchase of your new main residence.
It is important to know that any property you might have abroad counts towards the total of your properties. It means that if you are buying a property in the UK and already have at least one additional property abroad, higher rates of SDLT will apply.
New rules also affect companies and investors. A purchase of a residential property in the name of a company will mean that you will have to pay higher SDLT rates. Currently, when a residential property is purchased by a company and the purchase price exceeds £500,000, the SDLT rate is 15%. The higher rates of SDLT will only apply to purchases of residential property. SDLT in relation to the purchases of commercial property or “mixed-use” property will stay the same (5%).
If you already have a property and later inherit or are given another one as a present, you will not have to pay SDLT. However, such properties will be relevant when determining if you are purchasing an additional residential property or not.
SDLT is a considerable additional sum which you, as a purchaser, will have to pay when purchasing a property. We recommend you seek professional advice in order to determine the correct amount of SDLT you will have to pay once the property is purchased.