Your guide to stamp duty on additional properties

Mon 19 Mar 2018

By Jo White, Tax Consultant at Kreston Reeves

It has been almost two years since the 3% Stamp Duty Land Tax (SDLT) surcharge on the purchase of additional residential properties came into effect, on 1st April 2016.

Below is a summary of the requirements and how it could affect you:

The charge applies where the chargeable consideration for the transaction in question exceeds £40,000.

The 3% surcharge will arise where a residential property is acquired in addition to the main residence. It does not matter if the main residence is overseas.

The SDLT rates on additional properties are;

 Band(£) Existing residential SDLT rates (%)  New additional property SDLT rates (%) 
 0-40k 0
40k-125k 
125k-250k 
250k-925k 
925k-1.5m  10  13 
>1.5m  12  15 

The purchaser will be able to claim a refund of the additional SDLT if they subsequently dispose of their old main residence within 36 months of acquiring the new one. If the previous main residence is not sold within the 36 months then a refund of the surcharge will not be available.

Care needs to be taken with regard to the potential effect on unmarried couples and joint purchasers. Where a joint purchase of a property takes place and it is an additional property purchase for one or more of the joint purchasers, then the higher rate of SDLT will apply to the whole purchase.

Married couples and civil partners are treated as joint purchasers for the purpose of the legislation, even if only one of the parties is undertaking the transaction. For example if a wife was purchasing a property in her sole name, any properties owned by her husband would have to be taken into consideration when deciding whether the additional rate of SDLT would apply.

For companies, the additional rate will apply to any purchase of residential property not just “additional” property. Those looking to expand their property portfolio in a company structure will therefore need to factor in the extra cost.

The rules relating to the SDLT surcharge are complex and you should seek specific advice before undertaking any transaction that could fall within the legislation.

For specialist tax advice please contact Kreston Reeves.