Are you an individual thinking of purchasing a second residential property in the UK? Whether it is that holiday home you have always dreamed of or a buy-to-let property then there is a higher rate of Stamp Duty Land Tax (SDLT) that you need to be made aware of. Don’t get caught out.
Stamp Duty Land Tax is payable on all acquisitions of residential property by individuals over £125,000.00, with the exemption of first time buyers who will obtain relief from SDLT on a purchase of up to £300,000.00. It is charged using a ‘slice’ system, with the relevant rate applying to the part of the consideration that falls within that price band. (For figures and rates please see the table below).
Originally, purchasers of residential property would pay the ordinary SDLT rate, dependent on the price band, regardless of how many residential properties they owned.
However, from 1 April 2016, a purchaser of additional residential property such as buy-to-let, second homes and holiday homes, are required to pay an extra 3% in addition to the ordinary SDLT rate.
Non-rent Consideration Band
Ordinary SDLT rate
Higher SDLT for additional dwellings acquired on or after 1 April 2016
£0 to £125,000
3% (Except for properties where the chargeable consideration is less than £40,000)
Over £125,000 to £250,000
Over £250,000 to £925,000
Over £925,000 to £1.5 million
Over £1.5 million
- Table showing Ordinary Stamp Duty Land Tax rate and the higher rate for each price band.
Does the higher rate apply to me?
The higher SDLT rate does not apply to purchases of residential property by an individual buyer, if the buyer:
- Does not own any other residential property (solely or jointly);
- Is not a partner in a partnership that owns a residential property not used for the partnership’s trade; or
- Is (and any child of the individual is) not beneficially entitled to a residential property under an interest in possession or bare trust.
The supplemental 3% SDLT charge will be applicable if all of the following conditions are satisfied:
- The main subject-matter of the transaction consists of the purchase of a single residential property.
- The chargeable consideration for the transaction is £40,000.00 or more.
- On the completion of the transaction, the property is not subject to a lease with an unexpired term of more than 21 years.
- The property is not a replacement for the buyer’s only or main residence.
Subsequently, all acquisitions of residential property by companies are subject to the higher rates of SDLT, regardless of whether the company owns any other residential property (unless the chargeable consideration is less than £40,000.00 or the property is subject to a lease with an unexpired term of more than 21 years).
The higher SDLT rate will still count even if you only own a share in another property, so long as the share is worth £40,000.00 or more.
Properties elsewhere in the world are also considered. So if you are a UK resident or foreign international who own residential property overseas, then that property will be taken into account in determining whether the increased SDLT rates apply to the purchase of the additional residential property in the UK.
More than one buyer
If you are purchasing a second residential property with more than one buyer i.e. your spouse/civil partner etc. you have to decide whether the transaction would be a higher rates transaction by applying the conditions set out above.
If after applying the individual conditions to each buyer it is found that one of you would be liable for the higher rate of SDLT then this is the rate that must be applied to the transaction; regardless of the joint owners interest in the property.
SDLT is something that an individual should think about in all purchases but especially when purchasing an additional residential property that is not intended to replace their main residence. When you are considering purchasing a second residential property, please think about the impact of the higher rate SDLT.
For more information and advice, please contact a member of our Property Team at any of our four offices – York, Selby, Malton, Pickering.