Higher rates of SDLT on purchases of additional residential properties

In a drive to supposedly support home ownership and assist first time buyers, the Chancellor of the Exchequer has imposed stamp duty changes that levy a 3% penalty on those purchasing a second property. These stamp duty changes will mainly affect buy-to-let landlords but will also impact those purchasing second properties for other reasons, perhaps as a holiday home.

As expected, the announcement prompted a huge surge in property purchases early in the New Year and our property department were extremely busy working hard to ensure sales were completed in time for the deadline at the end of March.

From 1st April 2016, any additional residential purchase attracts a higher rate of SDLT, as shown below:

Purchase price of propertyStamp duty rateStamp duty rate for additional properties
Up to £40,00000
Over £40,000 – £125,00003%
Over £125,000 – £250,0002%5%
Over £250,000 – £925,0005%8%
Over £925,000 – £1.5 million10%13%
Over £1.5 million12%15%

To break this down, if you are purchasing a home for £275,000 for yourself to live in the current stamp duty bill is £3,750:

0% on the first £125,000£0
2% on the next £125,000£2,500
5% on the remaining £25,000£1,250

However, if you are purchasing a second home for £275,000 the new stamp duty bill is £10,800:

3% on the first £125,000£2,550
5% on the next £125,000£6,250
8% on the remaining £25,000£2,000

When considering the SDLT payable on a transaction, the first point to note is that for a purchaser who does not currently own property e.g. a first time buyer, or is selling their current main property, the SDLT charged will be in accordance with existing rates. The transactions that will fall foul of the new higher rates are those in which an additional residential property is being purchased that will not become the purchaser’s main residence, but is being kept either for investment as a buy to let property, as a holiday home, or for a family member.

If you have any further questions relating to this article, or any property related transactions please contact Spire Solicitors LLP on 01603 677077 to assist.