The Stamp Duty surcharge – Q&A

Since April 1 2016, anybody paying more than £40,000 for a second property will be paying a higher rate of stamp duty land tax (SDLT) than somebody buying a property for their main home. These measures were introduced in the autumn statement in 2015 for England, Wales and Northern Ireland and in the Scottish government’s draft 2016-17 budget.

Here are a few Q&A’s to help you understand how the new tax system works:

Q) What is SDLT?

A) SDLT is a tax paid by homebuyers when they buy property or land. On your main house the tax is paid if the purchase price is over £125,000. The amount paid is assessed on a tiered basis.

You pay the tax when you:

  • Buy a freehold property
  • Buy a new or existing leasehold
  • Buy a property through a shared ownership scheme
  • Are transferred land or property in exchange for payment e.g. you take a mortgage or buy a share in a house

Q) I am planning on buying a second home. How much extra stamp duty will I pay?

A) There is a 3% loading on existing stamp duty rates, which are set out in the table below:

Purchase price of property Existing residential SDLT rates New additional property SDLT rates
£0* – £125,000 0% 3%
Over £125,000 – £250,000 2% 5%
Over £250,000 – £925,000 5% 8%
Over £925,000 – £1.5 million 10% 13%
Over £1.5 million 12% 15%

* Transactions under £40,000 do not require a tax return to be filed with HMRC and are not subject to the higher rates.

To break this down, if you are purchasing a home for £200,000 for yourself to live in the current stamp duty bill is £1,500:

0% on the first £125,000 – £0

2% on the remaining £75,000 (the portion between £125,000 and £200,000) – £1,500

Total: £1,500

However, if you are purchasing a second home for £200,00 the new stamp duty bill is £7,500:

3% on the first £125,000 – £3,750

5% n the remaining £75,000 – £3,750

Total: £7,500

Q) What if I need to buy another main residence before I can sell my last one?

A) If you move out of your main residence (Home A) but keep it to buy another main residence (Home B), you will have to pay the 3% stamp duty surcharge initially. However, as long as you see your home within 36 months of completing the purchase, HMRC will make a full refund.

Q) What if I already own a property, but I am buying a second property with somebody who doesn’t?

A) Unfortunately, even if just one of you already owns a home, when you are buying another one together, the 3% surcharge will still apply.

For more information please contact our property department on 01603 677077.