STAMPING ON ADDITIONAL HOMES

Stamp Duty Land Tax (SDLT) will be charged at a higher rate from April on a home you buy that is not the home you live in.

The rates charged on each band will be

	SDLT1	SDLT2
Band	Rate	Rate
£1 to £125,000	0%	3%
£125,001 to £250,000	2%	5%
£250,001 to £925,000	5%	8%
£925,001 to £1,500,000	10%	13%
Above £1,500,000	12%	15%

SDLT1 is the tax on the home where you live (main residence)

SDLT2 is the tax on an additional home (not your main residence)

There are some properties that are exempt including caravans, mobile homes (probably including park homes), and houseboats. Homes sold for £40,000 or less are also exempt. But for homes over that price the 3% band will apply to the first £125,000 - there is no exempt band. Here are some examples.

SDLT2 will apply to a home which is bought but which you do not immediately live in as your main residence. So if you purchase a buy-to-let property - including furnished holiday lets - or a second home for holidays or weekends then SDLT2 will apply. 

If you buy a home to live in but for some reason cannot or do not sell your previous residence at the same time, SDLT2 will be charged. If you sell the original residence within 18 months the extra tax - the difference between SDLT2 and SDLT1 - can be refunded by HMRC. This rule and timetable applies even if the new purchase is not fit for human habitation and has to be done up to live in. But SDLT2 does not apply if the property purchased is not a residential property at the time you buy it - for example a garage or a church or an industrial unit.

Someone who owns a home they live in and also owns a second home - a holiday home or weekend retreat for example or a property they rent out - will not pay SDLT2 if they sell the home they live in and buy another within 18 months which they then live in. But they will be liable to SDLT2 if they sell their holiday home or rented property and buy another. If they buy a third property it will always be subject to SDLT2. They will also be liable to SDLT2 if they buy another home to live in, move into it, but do not sell the home they left within eighteen months. If you sell your home you live in and already have a second home you have 18 months to buy a new home to live in without SDLT2 applying. 

If a home is bought jointly and one buyer owns another main residence but the other dies not then SDLT2 will apply to the whole purchase price. So for example if a parent who owns their own home helps a child with a property purchase that will trigger SDLT2 on the whole cost if the parent is registered as a joint owner. The Government intends that SDLT2 will apply to the whole of the purchase price not just the share of it owned by the person with another main residence. But is consulting on this point (Q2).

Main residence

The home you live in is called your 'main residence'. It is not like Principle Private Residence for Capital Gains Tax where you can nominate a property to be your PPR. Nor is it decided simply on days of occupation. It is a matter of fact - where you and your family spend your time, where your work is, where your children go to school, where you are registered to vote, where correspondence from government or businesses is sent. 

Couples who are joint owners of the home they share will pay SDLT2 if they buy a second property and keep the first. But if one of them wholly owns the home they share the rules are different depending on whether they are married/civil partnered or not. 

• If they are not married/CP'd then the partner who is not an owner of the home they live in can buy a separate home without paying SDLT2 as long as one partner will live their as their main residence. 
• If they are married/CP'd then they will pay SDLT2 on a separate home they buy. The Government is consulting on how this rule might work as relationships end (Q1).

No concession is planned for people who buy a separate home for work. For example their family lives in one part of the country but they buy a flat which they live in four nights a week for work. That second home will be subject to SDLT2.

The details will be open to consultation (Qs 3-9) as will the procedure (Qs 19-21).

Administration

SDLT2 will apply from 1 April. Completion must happen on or before 31 March 2016 to avoid it. The one exception is if contracts were exchanged on or before 25 November (Autumn Statement day) but completion is after 31 March then SDLT2 will not apply. That will apply, for example, to property that was bought off-plan. 

From 1 April purchasers will have to fill in a declaration that they do or do not own another home. The conveyancer or solicitor will use that to decide which rate of SDLT applies.

SDLT applies in England, Wales, and Northern Ireland. It does not apply in Scotland which has its own property tax called Land & Buildings Transaction Tax (LBTT). It will also charge extra charge of 3% on each band from 1 April 2016.

SDLT2 will apply equally to people who live outside England, Wales, and Northern Ireland and buy property here. They will have to fill in the same declaration on property ownership. A Scottish resident who bought a second home in England would pay SDLT2 on the purchase. As would a resident of Dubai, Germany, or Australia. 

Matters for Consultation

Some details have not been finally decided. A consultation Paper was published on 28 December 2015, though it was initially due to be published on 15 December as para 1.6 made clear when it was first published. 

That may have been delayed to avoid clashing with the Scottish government Budget on 16 December, which cost seven working days from the period allowed. Para 1.6 has now been amended in the online copy to say it began on 28th December.

Whatever the reason for the delay, it gives a very short timetable of barely six weeks. The Government's own Code of Practice says "consultations should normally last for 12 weeks".

The main area where the Government seems open to views is the exemption from SDLT2 that may apply to larger landlords, companies, and trusts (Qs13-18).

Send comments to SDLT Additional Properties Consultation

Caveat

This blogpost is based on detailed conversations with HM Treasury and the Consultation published on 28 December. The final rules may change after the Consultation which ends on 1 February and will be announced on Budget Day, 16 March 2016. They will then be subject to parliamentary approval. 

Treat this blogpost as a guide and take professional advice before acting on the information contained in it.

30 December 2015

Version 1.52 including consultation proposals