Changes to Stamp Duty Land Tax – Do you know what they mean for you?

In a further attempt to dampen the UK Buy to Let market, the Chancellor announced that higher rates of stamp duty land tax (SDLT) would apply to purchases of additional residential properties, such as second homes and buy to let properties, from 1 April 2016.

The current rates and new rates of SDLT for additional residential property purchase are:

Band Existing SDLT rates New additional property SDLT rates
*£0 – £125k 0% 3%
£125k – £250k 2% 5%
£250k – £925k 5% 8%
£925k – £1.5m 10% 13%
£1.5m + 12% 15%


* Only applies to purchases over £40,000

Consultation Document

On 28 December 2015, a consultation document was issued which gives some answers on the detail of the new rules, although the document also creates some questions.

The higher rates will not apply to purchases below £40,000, purchases of caravans, mobile homes or houseboats. Also the new rates will not apply to the purchase of a main residence to replace your current main residence, if your current residence is sold on the same day. However if the sale of your current main residence is delayed and so for a time, you will own both houses, you will have to pay the higher rate of SDLT and then apply for a refund if the old house is sold within 18 months.

The document also refers to a possible exemption from the higher rates for purchases by corporate investors or funds making significant investment in residential property. However the consultation document includes various questions on the possible scope of this relief. If planning for a transaction now, reliance on this relief will carry a risk until the scope of it is clarified.

Commencement Date

SDLT is normally payable on completion or, if earlier, on substantial performance.

The higher rates will apply to all contracts entered into on or after 26 November 2015 where completion takes place on or after 1 April 2016, or where there is substantial performance of the contract on or after 1 April 2016. Therefore if substantial performance of the contract be on or before 31 March 2016, the higher rates of SDLT will not apply.

Buy to Let Restructuring

Restrictions to tax relief for interest on buy to let mortgages are causing some buy to let investors to consider transferring their properties into limited companies. In addition, some investors are choosing to sell some of their properties to reduce debt levels on their remaining portfolio.

Both of these options could be caught by the new higher rates of SDLT and so where possible it would be better to ensure that there is substantial performance by 31 March 2016.

Next Steps

The consultation process is still ongoing, but although the detail of the new rules is being ironed out, the principle of higher rates of SDLT for second properties and buy to let properties will happen and so you need to plan on that basis. If you would like advice on the scope of the new rules, please contact Alastair Wilson or Chris Hodgson.

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