From 1 April 2016, buyers of residential property that is not to be their main residence in England, Wales and Northern Ireland, will be liable for the higher rates of Stamp Duty Land Tax (SDLT). Basically any property subject to the higher rates, that costs more than £40,000, will be charged at the following rates:
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Where applicable, the higher rates will be 3% above the standard rates of SDLT that apply to purchases of residential property. Each rate will apply to the portion of the consideration that falls within each rate band: Purchase price of property |
Rate paid on portion of price within each band |
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Up to £125,000 |
3% |
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Over £125,000 and up to £250,000 |
5% |
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Over £250,000 and up to £925,000 |
8% |
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Over £925,000 and up to £1,500,000 |
13% |
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Over £1,500,000 |
15% |
These higher rates will be charged even if a home owner buys a replacement for their main residence before their present home is sold. This could create cash flow problems for the buyer.
For example, a residential property purchased as a main residence for £250,000 after 1 May 2016 would be liable for a SDLT charge of £2,500. If their present home is not sold before they purchase a replacement, then the purchase will be subject to the higher rates of SDLT that would amount to £10,000.
It will be possible to reclaim the £7,500 additional SDLT but only if a previous main residence is sold within 3 years of paying the higher rates on a new main residence. A refund can be claimed by making an amendment to the original SDLT return. Repayments need to be claimed within 3 months of the sale of the previous main residence, or within 1 year of the filing date of the return, whichever comes later.
For house purchases in Scotland a similar situation arises. The purchase of a replacement home before the existing main residence is sold would be subject to an additional charge to Land & Buildings Transaction Tax. In Scotland, the 3-year period is reduced to 18 months.