Changes to stamp duty from 1 April 2016

10 February 2016

In the Chancellor's autumn statement it was announced that a new stamp duty surcharge of 3% would be introduced for anyone purchasing an additional residential property from the 1 April 2016. In his blog post, partner, Ed Atkin takes a look at what this means to anyone considering buying another residential property.

Are you purchasing an additional residential property?

The Chancellor announced in his autumn statement that a new stamp duty surcharge of 3% would be introduced for anyone purchasing an additional residential property from the 1 April 2016. Whilst full guidance on the new rules is not expected until March of this year, the government did issue a consultation document on the 28 December 2015 which offers some guidance as to how the new stamp duty rates will be applied.

How will this affect me?

Put simply, anyone purchasing an interest in an additional property from 1st April 2016 will be subject to the following additional rates of stamp duty:

Property value Basic SDLT Stamp Duty Land Tax (SDLT) rate on additional properties
£0-125,000 0% 3% (except for properties costing less than £40,000 on which the rate is 0%
Over £125,000 to £250,000 2% 5%
Over £250,000 to £925,000 5% 8%
Over £925,000 to £1.5 million 10% 13%
Over £1.5 million 12% 15%

Subject to publication of the final form of legislation the main points are:

  • Only residential transactions will be caught and completions before 31st March 2016 will not be charged at the additional rate of SDLT.
  • Married couples and those in a civil partnership will only be able to own one residential property between them despite the fact it may only be registered in one party's name. Any additional purchases by either of them would be liable for an additional stamp duty payment. Importantly, however, this will not apply to unmarried couples where in the same scenario each party will be considered separately to the other.
  • It is likely that you will be liable to pay the higher rate of stamp duty even if you own property outside of the United Kingdom.
  • There will be a main residence replacement exclusion which means that the additional rate of stamp duty will not be payable if a party is purchasing a new main residence. However, if you are buying a new main residence but your existing house is not yet sold you will have to pay the new additional stamp duty on your purchase albeit you will be able to apply to HMRC for a refund of the additional 3% stamp duty you have paid provided that you complete the sale of your main residence within eighteen months of your purchase.
  • Importantly, a person with a beneficial interest in another property may also be caught. Take the example of parents wishing to help their children onto the property ladder and either become joint owners of a property with their children with no intention of ever residing in it or as is often the case they lend their deposit to their children enter into a deed of trust formally recording the fact that they have a beneficial interest in their children's property. Under this scenario any future purchase by the parents of an additional property (on the assumption it is not a replacement of their main residence) may trigger stamp duty at the additional rate.

It will take some time for the full implications and impact of the new legislation to be understood but in the meantime, those investing in additional properties will be rushing to complete their property transactions before the 31 March deadline.

It is imperative that you speak to your legal adviser about your particular circumstances to obtain full advice as to whether your transaction will be caught by the new Stamp Duty rules especially when one bears in mind that if stamp duty is underpaid as a result of either a mistake, whether it be careless or deliberate, the penalty of up to 100% of the unpaid tax can be payable.


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