As of 1 April 2016, a 3% surcharge on stamp duty land tax (SDLT) will apply to the purchase of additional residential property.
“Additional residential property” covers not only residential property situated in the UK, but also residential property situated anywhere in the world. That means if you own a residential property in the Philippines and you purchase a residential property in London, the London property will be additional and therefore the 3% surcharge will apply.
Key Points:
Individuals
- Where a purchaser buys a new main residence before disposing of their previous main residence, the 3% surcharge will be payable. However, providing a sale of the previous residence is completed within 36 months, the surcharge will be recoverable.
- Where a main residence is sold and the seller moves into rented accommodation without buying a new main residence immediately, the subsequent purchase of a new main residence within 36 months will not be subject to the additional 3% surcharge, even where the individual has retained buy-to-let property in the interim.
Companies
- Most notably and despite suggestions to the contrary in the Autumn statement, there will be no exemption from the surcharge for corporate bodies / investors with portfolios of 15 or more properties.
- This means that where a company purchases a residential property, even if that will be its only residential property, the 3% additional surcharge will apply, save that the surcharge will not apply where the company is already subject to the 15% rate of SDLT.
- Where a company benefits from relief from the 15% rate of SDLT (i.e. for purchases of residential property for use within a property rental business), the relief will not apply to purchases of additional residential properties. Where relief from the 15% rate of SDLT is available, the 3% higher rate will apply.
Where the surcharge applies, the applicable SDLT rates will be 3% above the current rates for residential property, as per the table below.
| Chargeable Consideration | Applicable SDLT Rate |
| Below £40k | 0% |
| Not more than £125,000 | 3% |
| More than £125,000 but not more than £250,000 | 5% |
| More than £250,000 but not more than £925,000 | 8% |
| More than £925,000 but not more than £1.5 million | 13% |
| More than £1.5 million | 15% |
It is intended that the proposed changes will have the effect of improving the landscape for first time property buyers. The changes are however likely to be less well received by property investors. Many, including the British Property Federation, are concerned that these changes will work to deter previously popular investment in build-to-rent schemes, causing “serious problems not only in London but across the regions”.
PLEASE NOTE: this briefing note contains information about current legal issues and is only intended as a general statement of the law – it does not give legal advice. No action should be taken in reliance on this note without specific legal advice.
For further information please contact:
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Nick Green Partner, Property |