Newsletter Spring 2016

SDLT on second homes

If you are buying a second home, or a residential property to let out, you may be hit by a supplemental 3% Stamp Duty Land Tax (SDLT) charge. This will also affect landlords who transfer their residential property portfolio to a wholly-owned company.

The SDLT supplement is due to apply to residential property purchases completed on or after 1 April 2016. The supplement will be calculated on the full purchase price where that is £40,000 or more. A similar 3% supplemental Land and Buildings Transaction Tax (LBTT) charge is set to apply to purchases of second homes in Scotland.

The supplement should not be payable where the new property is a replacement for your main home, but if the new home is purchased before the old one is disposed of, the SDLT supplement may have to be paid and reclaimed within the next 18 months, at a point when you only own one home. Properties owned in other countries will be counted.

The property you occupy as your main home will be deemed to be your main home for SDLT purposes. This may not be the property which you have nominated to be treated as your main home for CGT purposes.

Married couples will be deemed to have only one main residence between them, even if they live in different properties. Unmarried couples who occupy two different homes will be able to hold one property each before paying the 3% charge on any subsequent property acquisition.

A company can’t have a main home. Where a company buys even its first residential property, it will pay the extra 3% SDLT if the property costs £40,000 or more. There will be special arrangements where a company makes a bulk acquisition of 15 or more properties in one transaction.

The 3% SDLT charge will be calculated on the full consideration given for the property. A home purchased for £250,000 currently attracts SDLT of £2,500. Where the 3% SDLT supplement applies, the total SDLT charge will be £10,000.

Basic charge: (250,000 - 125,000) x 2% £2,500
Supplement: 250,000 x 3% 7,500
Total charge: 10,000