Changes to Stamp Duty Land Tax on second homes

Posted on: May 18th, 2016

From 1 April 2016 new Stamp Duty Land Tax (SDLT) rates were introduced for purchases of residential property if the purchase will mean you will own more than one property. The higher rates will also generally apply to purchases of residential property by companies. The higher rates mean an additional 3% on top of the standard rates.

Wendi Coupland of Coffin Mew’s Residential Property team in Southampton, explains.

The higher rates are as follows:

Freehold Property or transfer value SDLT rate
Up to £125,000 3%
From £125,001 to £250,000)  5%
From £250,001 to £925,000) 8%
From £925,001 to £1.5 million) 13%
Above £1.5 million) 15%

To check if you will be liable for the higher rates you should first consider how many properties you will own at the end of the day of the transaction. If the answer is one, then the standard rates will apply. If the answer is two or more, you should then consider whether the property being purchased is replacing your main residence which is being sold. If yes then the standard rates apply. If not, the purchase is likely to be caught by the higher rates.

If there is a delay on selling your main residence, and you purchase the additional property first, then you will need to pay the higher rates. However, if you sell your main residence within three years of the purchase, you will be able to claim a refund of the additional tax paid and further details of this will be covered in a later article.

There are exceptions. For example you may not have to pay the higher rates if you exchanged contracts before 26 November 2015.

Further details will be provided in later articles of other specific scenarios for example joint purchasers and buying for children but if you have any queries in the meantime please contact a member of the Coffin Mew residential property team.

The standard rates if you are not caught by the new higher rates are set out below for ease:

Freehold Property or transfer value  SDLT rate
Up to £125,000 Zero
From £125,001 to £250,000) 2%
From £250,001 to £925,000) 5%
From £925,001 to £1.5 million) 10%
Above £1.5 million) 12%

If you would like further information, please contact Wendi Coupland in Coffin Mew’s conveyancing team in Southampton.