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Stamp Duty Increase

Stamp Duty Land Tax (SDLT) changes have been implemented by the Government, triggering homeowners purchasing additional residential properties to pay a higher rate on completions that take place from 1 April 2016.

The change sees an additional 3% tax payable on all additional residential properties, a calculator showing the amount of SDLT payable on a purchase can be found on the Government’s website.

The following table shows the percentage payable for owning only one residential property and additional residential properties:

Purchase price
of property

Stamp duty
rate

Stamp duty rate
for additional properties

£0 – £125,000

0

3%

Over £125,000 to £250,000

2%

5%

Over £250,000 to £925,000

5%

7%

£925,000 to £1.5 million

10%

13%

Over 1.5 million

12%

15%

All purchases with a major interest in one or more dwelling will attract the higher rate of SDLT. A ‘dwelling’ is a building, or part of a building, used for day-to-day private domestic existence. For example, the purchase of a plot of garden land from a neighbour is not a dwelling.

However, there are exceptions. Properties under £40,000.00 are exempt from SDLT as well as caravans, mobile homes and houseboats. The higher rates of an additional 3% are not applicable to non-residential properties or mixed use properties.

If a second property is purchased as a main residence but your current main residence is not yet sold, the higher rate of SDLT will initially be payable. If the previous main residence is subsequently sold within 3 years of paying the higher rates on the new main residence, a refund can be obtained for the additional amount of SDLT paid. This refund must be claimed within 3 months of the sale of the previous main residence.

The following example published on the Governments guidance notes shows this scenario:

Example: An individual buys a dwelling and intends it to be her main residence. The effective date of the transaction is 31 May 2019. If she had previously sold a dwelling at any time on or since 1 June 2016 then the purchase may be a replacement of a main residence. The dwelling she disposed of would have had to have been her only or main residence at some time during the period 1 June 2016 to 31 May 2019. She must not have acquired another new main residence after the disposal and before the purchase.

The Government have provided various examples of different situations which may raise queries as to whether the higher rate of SDLT is payable, further information can be found on the Guidance Notes provided on their website.

For more information and advice on conveyancing please contact us.