Delving into the Detail of the Increased Stamp Duty Land Tax
Last updated on September 25th, 2019 at 4:34 am
As we all know, Stamp Duty Land Tax (SDLT) increased in April, for those people buying second and buy-to-let properties. This article delves more into the detail of this increase – useful reading for those studying for any of the CII R02, R03, R06, AF1, AF4 or AF5 exams.
This article is relevant to examinable tax year 2016/17.
Since April, purchases of second and buy-to-let properties have incurred an extra 3%, but we wonder if everyone is aware of the detail.
The higher rates will not apply:
- Where the price of the property is less than £40,000 (seems arbitrary as virtually all properties will be over this amount). If it’s over, then SDLT applies to the whole of the purchase price.
- To purchases of caravans, houseboats and mobile homes
- Where the property can be used for both residential and non-residential (ie a flat over a shop where both is rented out)
- Where someone is moving house (swapping their main residence for another main residence) and already has a buy-to-let property; the legislation is not retrospective and the person is replacing their main residence.
- Where someone is buying a buy-to-let property as their first property
The higher rates will apply:
- If someone is moving house but decides to keep their existing house; although they are replacing their main residence they will ultimately own two properties. If they sell the original house within 36 months they can apply for a refund of the increased SDLT. A repayment needs to be claimed on an SDLT repayment request form within 3 months of the sale of the main residence or within 1 year of the filing date of the return – whichever date comes later.
- Where existing home-owning parents buy property jointly with their children, the new rates will apply to the whole price of the property. (If they just stump up the deposit, then they aren’t on the deeds so the new rates won’t apply).
- Where couples (married or not), where one already owns a property, buy a property together; rates apply to the whole purchase price.
A second property is bought for £250,000. Before the surcharge, the SDLT would have been £2,500 worked out as:
Up to £125,000 x 0%
£125,000 x 2%
Now the bill will be £10,000 worked out as:
Up to £125,000 x 3% = £3,750
£125,000 x 5% = £6,250
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Over to You…
Were you already aware of the circumstances where the SDLT higher rates would apply? Let us know in the comments.