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SDLT on Additional Residential Properties - Policy Paper Published

HMRC has today published its policy paper relating to higher SDLT (Stamp Duty Land Tax) rates on purchases of additional residential properties, such as 'buy to let' purchases and 'second homes'.

A higher rate of Stamp Duty was originally proposed in the Spending Review and Autumn Statement 2015, forming part of the government's Five Point Plan for housing, with a consultation then running between 28th December 2015 and 1 February 2016 before the final policy then came into force.

The new higher rate of stamp duty will be charged on purchases of additional residential properties from 1st April 2016, and will be three percentage points above the current SDLT rates.

Read our guide to SDLT rates for additional residential property purchases or read the full Policy Paper on the HMRC website.

Stamp Duty Rates for Second Homes and Buy to Let purchases

You must pay Stamp Duty Land Tax (SDLT) on any residential property where the purchase price is over £125,000.

If the property is being purchased as a second home or a buy to let property, or at the end of the day of the transaction, if you will own two or more residential properties and are not replacing a main residence, you will have to pay the higher rate of Stamp Duty Land Tax that are applicable on purchases of additional residential properties from 1st April 2016 onward.

You can use our Stamp Duty Calculator to find out how much SDLT you will have to pay on your additional property purchase.

Stamp Duty Rates for Additional Property Purchases

Property or lease premium or transfer value Old SDLT Rate New SDLT rate
Up to £40,000 Zero Zero
£40,000 - £125,000 (on the portion from £0 - £125,000) Zero 3%
The next £125,000 (the portion from £125,001 to £250,000) 2% 5%
The next £675,000 (the portion from £250,001 to £925,000) 5% 8%
The next £575,000 (the portion from £925,001 to £1.5 million) 10% 13%
The remaining amount (the portion above £1.5 million) 12% 15%

Example

If you buy an additional property for £280,000, the SDLT you owe is calculated as follows:

3% on the first £125,000 = £3.750
5% on the next £125,000 = £6,250
8% on the final £30,000 = £2,400
Total SDLT = £12,400

Before April 1st 2016, the Stamp Duty payable would have been only £4,000, so the amount due has more than trebled.

You can read more about SDLT on residential property purchases in our help and advice section.

Stamp Duty on Residential Properties

You must pay Stamp Duty Land Tax (SDLT) on any residential property where the purchase price is over £125,000, unless you are a first time buyer.

You can use our Stamp Duty Calculator to find out how much tax you will have to pay.

Current Stamp Duty Rates

Property or lease premium or transfer value SDLT rate
Up to £125,000 Zero
The next £125,000 (the portion from £125,001 to £250,000) 2%
The next £675,000 (the portion from £250,001 to £925,000) 5%
The next £575,000 (the portion from £925,001 to £1.5 million) 10%
The remaining amount (the portion above £1.5 million) 12%

Example

If you buy a property for £280,000, the SDLT you owe is calculated as follows:

0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £30,000 = £1,500
Total SDLT = £4,000

From April 1st 2016, if you are purchasing a property that you will be renting out, often known as a 'Buy to Let' property, Stamp Duty will be calculated at 3% over the standard rates. This rate will also apply to the purchase of 'second homes', and any purchase where an individual owns two or more properties at the end of the transaction and has not replaced their main residence. Read our additional residential property Stamp Duty guide for more information.

Stamp Duty is also payable when you purchase the freehold (buying the existing ‘assigned’ lease) for a property from your landlord, and is calculated on the same scale as for a property purchase. The purchase price of the lease is known as the ‘lease premium'.

Similarly, if you purchase a new residential leasehold property you will also pay the lease premium, but in addition if the total rent over the life of the lease (known as the ‘net present value’) is more than £125,000, you will also pay additional Stamp Duty of 1% on the amount over £125,000.

Special Rates

There are different Stamp Duty rates, rules and calculations for:

  • commercial properties
  • corporate bodies
  • people buying 6 or more residential properties in one transaction
  • shared ownership properties
  • multiple purchases or transfers between the same buyer and seller (also know as linked purchases)

Further details can be found in the Stamp Duty Land Tax section of the gov.uk website.