Residential Property (Single Property Owners)
Regular Stamp Duty Land Tax (SDLT) applies to properties that cost over ￡125,000 (￡40,000 for additional homes)
Stamp Duty does not apply in Scotland. Here you pay a Land and Buildings Transaction Tax when you buy a property. This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.
What are the current rates of SDLT (Residential, single property)?
- Up to ￡125,000
- ￡125,000.01 to ￡250,000
- ￡250,000.01 to ￡925,000
- ￡925,000.01 to ￡1,500,000
Stamp Duty Rate - on that portion of the purchase price
Current SDLT rates are payable only on the PORTION of a property price which falls within each band. For example:
If you buy a house for ￡275,000, the SDLT you owe is calculated as follows:
0% on the first ￡125,000 = ￡0
2% on the next ￡125,000 = ￡2,500
5% on the final ￡25,000 = ￡1,250
Total SDLT = ￡3,750
Buy To Let and second home Stamp Duty tax bands:
From 1st April 2016, property buyers purchasing a Buy To Let (BTL) or second home over ￡40,000 in England and Wales will have to pay an additional 3% surcharge on each stamp duty band listed above.
UK properties being bought for over ￡500,000 by companies will pay 15% on the total value.
For further information on Stamp Duty please go to the Stamp Duty land tax section on the Gov.UK website
Q. What is the 3% Stamp Duty surcharge?
A. It’s a 3% loading on existing Stamp Duty rates, which are set out above
Q. Who has to pay it?
A. Anyone who is buying an additional residential property. This could mean a holiday home, buy-to-let or even a main residence you plan to live in.
Even if you already own just a share in another property, it will count (so long the share is worth more than ￡40,000).
Properties anywhere in the world are considered too. So, if you own a 30% share of a ￡300,000 ski chalet and are buying your first home in the UK, you’ll have to pay the extra tax.
The higher rate Stamp Duty applies to the purchase of property in England, Wales, Northern Ireland and – under a separate announcement in the Scottish Government’s 2015 pre-election Budget – in Scotland too.
Q. When did it kick in?
A. The new surcharge took effect from 1 April, 2016.
Q. How is the tax charged?
A. Stamp Duty is charged on a tiered basis (so you only pay the higher rate on the slice above any threshold – the same as income tax). But the 3% surcharge loading applies to the entire purchase price of the property.
Q. How much does that translate into?
A. As an example, if you are buying a second home with a purchase price of ￡300,000, just the extra 3% Stamp Duty would equate to ￡9,000 (3% of the entire price). This is in addition to the ￡5,000 regular Stamp Duty bill on a home of this value, bringing the total payable to ￡14,000.
To get an overall Stamp Duty figure on a second property, work out the regular cost first then calculate 3% of the purchase price and add the two figures together.
Q. What if the home I am buying will be my main residence?
A. If the home you are buying directly replaces your main residence, you will not be liable for the 3% surcharge, even if you own an additional home/s at the same time. This example is straight from the Government’s consultation document:
“A owns both a main residence and a second home. She sells her main residence and purchases a new one. Although she has two properties at the end of the day of the transaction, she has replaced her main residence so the higher rates will not apply.”
But replacing your main residence means the last one will need to be disposed of (ie, SOLD or GIFTED).
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 and buy another main residence (Home B), you will have to pay the 3% Stamp Duty surcharge initially. However, so long as you sell Home A within 36 months (increased from 18 months in the March 2016 Budget) of completing on the purchase, HMRC will make a full refund.
The refund applies to the sale of any property that has been your only or main residence at some point during the three years leading up to the purchase (ie, you don’t have to be moving directly out of one main residence and in to the new one). How long you lived in a previous main residence will not be relevant.
Q. How will the refund work?
A. You’ll need to complete one of HMRC’s repayment request forms and submit it within three months of the sale. Until an online version is available, you’ll have to print off this form and post it to HMRC’s Birmingham Stamp Office. HMRC says it aims to process all repayments within 15 working days of receiving the information requested. Payment, if successful, will then be issued by payable order. If you are not successful, HMRC will write and explain why.
Q. What if I already own a property, but I'm buying with someone who doesn’t?
A. Unfortunately even if just one of you already owns a home (whether you are living in it or not), when you go to buy another one together, the 3% Stamp Duty surcharge will apply.
Q. What happens if I've split from my partner but my name's still on the deeds of our home?
A. If you are separated or getting divorced and want to buy a new home to live in but your name is still on the deeds of your previous home (which is NOT being sold), this will constitute buying an additional property which means the 3% surcharge will initially apply.
However, if you go onto sell your share of the home back to your former partner (or sell the home entirely) within 36 months of completing, HMRC will provide a full refund.
Q. Will HMRC link me to a partner that I'm separated from but still legally married to?
A. After the March 2016 Budget, the Government confirmed that married couples who are living separately in circumstances that are likely to become permanent will NOT be treated as one unit for the purposes of the 3% surcharge. In other words, if you are buying a home that only incurs the 3% surcharge on the basis of your legal spouse’s situation, you won’t have to pay it.
Q. Can I avoid the surcharge by setting up a limited company?
A. The Government has a keen eye on preventing tax avoidance with this levy, so you won’t be able to escape the surcharge by setting up a limited company for the purpose of buying an additional home or homes.
Q. What if I already have a limited company?
A. The surcharge will still apply when buying additional homes through an existing limited company.
Q. What if the home I want to buy has a 'granny annex'?
A. The 3% surcharge was initially going to be applied to any annex or additional property purchased alongside a main residence if it had a value of more than ￡40,000 and could be bought by a third party and used as an independent dwelling.
However, due to what it described as a ‘technical unfairness’, the Government made an amendment to the Finance Bill to reverse this. So long as the annex is bought alongside the main residence, it will NOT be subject to the higher rates Stamp Duty. (An annex must be within the grounds of the main home and worth no more than a third of the total transaction value.)
The Treasury explained: “Under the new rules, if you buy a main residence (either your first property or a replacement for a previous main residence) worth ￡250,000 and an annex capable of separate sale worth ￡50,000 in a single transaction, Stamp Duty at the standard rates will be charged on the total value of ￡300,000.
Anyone who may have already paid the extra surcharge under these circumstances since 1 April, 2016, will have it refunded.
Q. What if I inherit my property?
A. No Stamp Duty is payable on properties that are inherited, so the 3% premium will not be relevant. However, if you have inherited a property and go onto purchase an additional home without selling it, you will be hit with the surcharge.
The March 2016 Budget did hold some reprieve on inherited properties, however. The Government confirmed that a small share (50% or less) in a single property which had been inherited within 36 months prior to buying another home (which would otherwise attract the 3% surcharge) will NOT be considered as an additional property.
Q. Do plots of land count?
A. Just like regular Stamp Duty, the 3% loading will only apply to purchases of residential property. A plot of land (even if it will subsequently be used for a home) is not counted as residential, so the surcharge will never apply.
Similarly, if you already own a plot of land and are buying an additional property, it will not be considered for purposes of the higher tax.
Q. What about other homes specifically designed for holiday use?
A. Holiday homes – even if they are furnished holiday lets or they come with restricted use during the year – will be treated the same way as any other additional property purchases.
Q. Can I just omit to mention to my solicitor about the fact I already have a home?
A. HMRC has instructed the country’s solicitors and property lawyers to ask buyers the question outright of whether they already own another property. If you don’t answer truthfully it’s tantamount to fraud – penalties for which could be a lot worse than a 3% Stamp Duty loading.
Q. Is all this set in stone?
A. Yes. The final policy design was announced in the Chancellor’s Budget on 16 March and it kicked in as planned on 1 April 2016.