Stamp Duty Land Tax (SDLT) is payable on the purchase of residential property in increasing portions of the property price above £125,000.
Current rates of SDLT on individual and additional properties are as follows:
- Purchase price up to £125,000 – SDLT rate Zero; additional property rate 3%
- The next £125,000 (portion from £125,001 to £250,000) – SDLT rate 2%; additional property rate 5%
- The next £675,000 (portion from £250,000 to £925,000) – SDLT rate 5%; additional property rate 8%
- The next £575,000 (portion from £925,000 to £1.5m) – SDLT rate 10%; additional property rate 13%
- The remaining amount (the portion above £1.5m) – SDLT rate 12%; additional property rate 15%
Note that SDLT no longer applies in Scotland, where a Land and Buildings Transaction Tax (LBTT) is charged instead.
A higher rate of SDLT will be charged on purchases of the additional residential property completed on or after 1 April 2016.
If contracts were exchanged after 25 November 2015, then the higher rates apply if the purchase was completed on or after 1 April 2016. However, if contracts were exchanged on or before 25 November 2015 but not completed until on or after 1 April 2016, the higher rates will not apply.
The amount of the additional charge will be 3% on top of the normal SDLT charge.
Leo buys a second residential property on 25 July 2017 costing £300,000. This transaction will attract SDLT as follows:
£125,000 x 3% = £3,750
£125,000 x 5% = £6,250
£50,000 x 8% = £4,000
Total SDLT due £14,000
Broadly, the higher rates will not apply if at the end of the day of the transaction an individual owns only one residential property, irrespective of the intended use of the property.
If the main home is sold after a new home is purchased, the higher rate will be payable. However, a refund can be obtained if the old home is sold within three years of buying the new one.
The higher rates are not payable on the purchase of a new property if the chargeable consideration is less than £40,000.
In addition, the charge is not payable where:
- Someone else holds a lease on the property with more than 21 years to run;
- A lease is purchased that has less than 7 years to run.
The higher rates will not be applicable if an individual’s other residential properties meet either of the two criteria above, or each has a value of less than £40,000 when the new property is purchased.
Finally, the higher rates will not apply to the purchase of mobile homes, caravans, or house boats; or to purpose built student accommodation.