Stamp duty land tax (SDLT) on second homes factsheet

From 1 April 2016 the rates for Stamp Duty Land Tax (SDLT) will be higher by 3% if you buy an additional residential property for £40,000 or more in England, Wales and Northern Ireland.

Residential properties as main home

Where a person acquires a property to replace their main residence the surcharge will not apply provided that the replacement property is acquired after the disposal of the main residence.

However, if the property is acquired before the old residence is disposed of then the 3% SDLT surcharge will be payable on the date of acquisition. The taxpayer can get a refund for the amount above the normal SDLT rates if they then sell the previous main residence within 3 years.

A refund must be claimed within 3 months of the sale of the previous main residence or within 12 months of the filing date of the return, whichever comes later.

To claim a refund you can complete an online form with HM Revenue and Customs.

The additional surcharge rate of SDLT is 3% on top of the normal SDLT charge.

Spouses and civil partners are treated as one unit for these purposes where they are living together at the beginning of the year or from the date of marriage, and have not separated in such circumstances as is likely to prove permanent.

Residential properties as investments

From 6th April 2016 onwards where a person acquires a residential property as an investment there will be a SDLT surcharge payable of 3%. Houseboats, caravans and mobile homes are exempt from this charge.

Where the consideration is £40,000 or less no SDLT surcharge is payable.

Residential properties purchased by Companies

The higher rates will apply to the purchase of major interests in one or more
dwellings by a company, if Conditions A and B are met in respect of at least one
of the dwellings:

-    Condition A - the dwelling purchased is worth £40,000 or more;
-    Condition B - the dwelling is not subject to lease which has more than 21 years
to run on the date of purchase;

If none of the interests in dwellings meet both Conditions A and B then the higher
rates will not apply to the purchase.

SDLT payment date

SDLT is payable, and the SDLT return is due, 30 days after the date of the effective transaction-this is normally the date of completion rather than the date of exchange of contracts.

The SDLT regime for residential property changed to a banding system on 4 December 2014.
The bands and rates for individuals are as follows:

Band: market price £ Residential Second home
0- 40,000 0% 0%
0 -125,000 0% 3% on total
125,001 – 250,000 2% 5%
250,001 – 925,000 5% 8%
925,001 -1,550,000 10% 13%
1,500,001 and over 12% 15%

The method of calculation is simply to apply the rates specified to the parts of the relevant consideration falling within each band.

Stamp Duty Land Tax (SDLT) may be charged at 15% on residential properties costing more than £500,000 bought by certain corporate bodies - or ‘non-natural persons’. These include:

-    Companies
-    partnerships including companies
-    collective investment schemes

These bodies may also need to pay Annual Tax on Enveloped Dwellings.

Reliefs may be available to reduce the 15% charge, in particular if the company is a property rental business or a property development trade.

If you have any queries on how these rules may affect you then please contact us.