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HMRC internal manual

Stamp Duty Land Tax Manual

SDLT - higher rates for additional dwellings: Individuals – purchasing two or more dwellings

Where an individual purchaser purchases two or more dwellings in the same transaction, different tests determine whether the transaction is liable to the higher rates of tax.  A transaction involving more than one dwelling will either be liable to the higher rates of tax or it won’t, the rules do not allow for a single transaction to be a combination of higher and normal residential rates.

The guidance at SDLTM09755 explains that special treatment may apply where more than one dwelling is purchased in a single transaction but one of the dwellings is worth at least two thirds of the total transaction value.

The same Conditions are used for each purchased dwelling or the purchaser as for an individual purchasing one dwelling, although Condition A is modified.  Not all of these tests must be met for a purchase of two or more dwellings to be liable to the higher rates. 

  • Condition A - the chargeable consideration attributable to a dwelling on a just and reasonable basis is £40,000 or more;
  • Condition B - the dwelling is not subject to lease which has more than 21 years to run on the date of purchase;
  • Condition C - the purchaser owns a major interest in another dwelling which has a market value of £40,000 or more and is not subject to a lease which has more than 21 years to run at the date of purchase of the new dwelling; and
  • Condition D - the dwelling being purchased is not replacing the purchaser’s only or main residence.

There are two independent tests for when the higher rates apply to a purchases of more than one dwelling by an individual.

If there are joint purchasers, then if one of the two tests is met by any one of them then the higher rates will apply.

In any case where none of the interests in dwellings purchased meet both Conditions A and B (for example the purchase of a freehold over a block of flats where all the flats are subject to long leases) the higher rates will not be applicable.

Two or more purchased dwellings meet Condition A and Condition B

The higher rates of tax will apply if two or more of the dwellings purchased meet Conditions A, B and C [Para 5(1)(c)].  Conditions B is the same as that for a purchase of a single dwelling.

Condition A requires that the amount of chargeable consideration attributable to a dwelling covered by the transaction is at least £40,000 when calculated on a just and reasonable basis [Para 5(2)].

If two or more dwellings are purchased in the same transaction and at least two of them are worth £40,000 or more and are not reversionary on a lease with more than 21 years to expiry then the transaction will be a higher rates transaction.  This is irrespective of whether the individual owns an interest in another dwelling at the end of the day or whether one of the purchased dwellings replaces a main residence.

Only one dwelling meets Conditions A and B

The second test for the higher rates where more than one dwelling is purchased in a single transaction is applicable where only one of the dwellings meets both Conditions A and B [Para 6(1)(c)].  If this is the case then the transaction is a higher rates transaction only if the dwelling that meets Conditions A and B also meets Condition D above and Condition C is met in respect of the purchaser. 

Condition C is that the individual owns another major interest worth £40,000 or more, and which is not reversionary on a long lease at the end of the day of the transaction [Para 6(1)(e)].

Condition D is that the purchase of the dwelling (which meets Conditions A and B) is not a replacement of a main residence [Para 6(1)(f)].

This test treats the purchase of a substantive interest in a dwelling (that meets Conditions A and B) which is accompanied by under £40,000 or reversionary interests in other dwellings in the same way as if that dwelling were purchased on its own and subject to the tests for a purchase of a single dwelling.

The meaning of replacement of a main residence is the same here as above.

Condition C applies with the same interests treated as owned by the individual - see SDLTM09815.

`Para` references are to paragraphs in Schedule 4ZA of the Finance Act 2003.