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This publication is available at https://www.gov.uk/government/publications/stamp-duty-land-tax-higher-rates-on-purchases-of-additional-residential-properties/stamp-duty-land-tax-higher-rates-on-purchases-of-additional-residential-properties
Who is likely to be affected
Individuals purchasing a residential property in England, Wales and Northern Ireland who, at the end of the day of the transaction, own 2 or more residential properties and are not replacing a main residence. Companies and other non-natural persons purchasing residential property in England, Wales and Northern Ireland.
General description of the measure
From 1 April 2016 higher rates of Stamp Duty Land Tax (SDLT) will be charged on purchases of additional residential properties, such as second homes and buy-to-let properties. The higher rates will be 3 percentage points above the current SDLT rates:
|Threshold||Existing SDLT rates||New additional property SDLT rates|
|£0 - £125k||0%||3%|
|£125k - £250k||2%||5%|
|£250k - £925k||5%||8%|
|£925k - £1.5m||10%||13%|
If, at the end of the day of the transaction, an individual owns 2 or more properties and has not replaced their main residence, the higher rates will apply. Purchasers will have 36 months to either claim a refund from the higher rates, or before the higher rates will apply, in the event that there is a period of overlap or a gap in ownership of a main residence. Companies purchasing residential property will be subject to the higher rates, including the first purchase of a residential property. Properties purchased for under £40,000, caravans, mobile homes and houseboats will be excluded from the higher rates. Furthermore, small shares in recently inherited properties will not be considered when determining if the higher rates apply.
Higher rates of SDLT on additional residential properties form part of the government’s Five Point Plan for housing, and are part of the government’s commitment to supporting home ownership and first-time buyers.
Background to the measure
This measure was announced at the Spending Review and Autumn Statement 2015. The government ran a consultation on these changes between 28 December 2015 to 1 February 2016.
This measure will have effect for purchases which complete on and after 1 April 2016. Where contracts have been exchanged on or before 25 November 2015 but not completed until on and after 1 April 2016, the higher rates will not apply.
This measure does not apply in Scotland as SDLT was devolved to Scotland on 1 April 2015. This measure will apply in Wales until 1 April 2018, when SDLT will be devolved to Wales.
The main SDLT legislation is in Part 4 of Finance Act (FA) 2003. Section 55 provides for the amount of tax chargeable and sets out separate tables of rates for purchases of residential and non-residential (or mixed residential and non-residential) property. Section 56 and Schedule 5 to FA 2003 provide for a separate SDLT charge on the net present value of the rent payable under a new lease.
Legislation will be introduced in Finance Bill 2016 to insert a new section 56A and Schedule 5A into FA 2003 to provide for the higher rates of SDLT for purchases of additional residential property.
The changes will have effect on and after 1 April 2016 by virtue of a resolution under the Provisional Collection of Taxes Act 1968.
Summary of impacts
Exchequer impact (£m)
|2016 to 2017||2017 to 2018||2018 to 2019||2019 to 2020||2020 to 2021|
These figures are set out in Table 2.2 of Budget 2016 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costing document published alongside Autumn Statement 2015.
This measure is not expected to have any significant macroeconomic impacts.
The costing accounts for a behavioural response whereby the volume of affected transactions is reduced. It should increase the amount of owner-occupied properties.
Impact on individuals, households and families
Around 10% of residential property transactions are expected to be subject to the higher rates.
This measure is not expected to have an impact on family formation, stability or breakdown.
The impact of these changes will reflect the demographic composition of buyers purchasing additional residential properties.
This measure is not expected to have an impact on any of the protected equality groups.
Impact on business including civil society organisations
Businesses purchasing residential property may pay a higher amount in SDLT.
Lawyers and conveyancers are expected to incur negligible one-off costs due to familiarising themselves with the new structure of SDLT. The process of automatically calculating the amount of tax will be fully integrated into HM Revenue and Customs (HMRC) online systems.
Operational impact (£m) (HMRC or other)
HMRC will have to make changes to IT systems to implement this measure, at an estimated cost of £400,000. Staff costs of administering this change are estimated at £1.5 million a year.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns.
If you have any questions about this change, please contact the HMRC SDLT Helpline on Telephone: 0300 200 3510.