How to Know When the Higher Tax Applies to Second Properties

As we all know, purchases of second and buy-to-let properties incur an extra 3% Stamp Duty Land Tax (SDLT), but we wonder if everyone is aware of the finer detail. Be sure to have a go at answering the bonus practice question – helpful for your CII CF6, R02, R03, R06, R07, AF1, AF4 or AF5 exam revision.

This article is relevant to examinable tax year 2016/17.

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 a 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).

• For couples (married or not) where one of the couple already owns a property, and they buy a property together; rates apply to the whole purchase price.

A Practice Question for You…

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% and £125,000 x 2%

What is the SDLT bill now – since April 2016? See below for the answer.

Grab the resources you need!

If you’re studying for your CII R03 exam, and you’re wanting to feel pleased with the outcome on results day, grab our free taster to try out one of Brand Financial Training’s mock exam papers for yourself.  Click the link to download the R03 Mock Exam taster now!

Alternatively, you can download a taster for CF6 R02, R06, R07, AF1, AF4 or AF5 if you are sitting one of those exams.

A: Now the bill will be £10,000 worked out as: up to £125,000 x 3% = £3,750 and £125,000 x 5% = £6,250