What is Stamp Duty Land Tax?

Stamp Duty Land Tax must be paid by any property owner in England and Northern Ireland over a certain price.

You will pay tax if any of the following apply to your purchase:

  • you are buying a freehold property
  • the property is a new or existing leasehold
  • you’re buying a property through a shared ownership scheme
  • you have transferred land or property in exchange for payment, for example, you take on a mortgage or buy a share in a house.

Properties the higher rates apply to

If you or a partner own or part own more than one residential property worth £40,000 or more you will be paying the higher rates on your new purchase. Residential property includes:

  • property owned on behalf of children under the age of 18. As parents, you’ll be treated as the owner, even if the property is held through a trust and you are not the trustee
  • you have an interest in as the beneficiary of a trust
  • your current home at the end of the day that you buy your new property.

When do the rates not apply?

There are certain people, properties and transactions where the higher rates do not apply.

People

Higher rates do not apply to anyone who will both:

  • use your new property as their main home
  • have sold or given away the last main home they owned before you buy your new home (or on the same day).

Property

Higher rates do not apply to any property (or part of a property) if any of the following apply:

  • the property is worth less than £40,000
  • it is for both residential and non-residential use such as a shop with a flat above
  • it’s a movable property. These include caravans, houseboats and mobile homes, so long as they are not permanently fixed.

The rules also do not apply to any property that you lease if either:

  • the lease is for 7 years or less from the date it was granted
  • the lease is owned by someone else and it has more than 21 years left

Transactions

If you plan to transfer any ownership of a residential property to your spouse, higher rates will not apply as long as there is nobody else involved in the transfer.

You may also be looking to increase your ownership of a property that you currently own. You won’t have to pay the higher rates as long as all of the following apply:

  • your ownership must already be at 25% or more
  • the dwelling must have been your only or main home for the last 3 years
  • if you’re extending a lease, it must have at least 21 years left.

What are the Stamp Duty Land Tax higher rates?

The higher rates from 1 July 2021 to 30 September 2021 are as follows:

Purchase price Rate
Up to £250,000 3%
Over £250,000 to £925,000 8%
Over £925,000 to £1.5 million 13%
Over £1.5 million 15%

 

From 1 October 2021, the rates will change to the following:

Purchase price Rate
Up to £125,000 3%
Over £125,000 to £250,000 5%
Over £250,000 to £925,000 8%
Over £925,000 to £1.5 million 13%
Over £1.5 million 15%

 

When do Stamp Duty Land Dax higher rates apply?

Let’s look at an example scenario. A client owns several residential properties in her sole name. Her spouse wants to buy a buy-to-let property in their own name. Will Stamp Duty Land Tax higher rates for additional dwellings apply?

The short answer is: yes.

An additional 3% charge will apply in this scenario. For this to apply to the spouse purchasing alone, the conditions set out para 3(1) Sch. 4ZA FA 2003 will apply to both spouses. This is assuming the other spouse was a purchaser and provided both spouses or civil partners are living together at the date of completion(Para 9 Sch. 4ZA FA 2003).

The transaction is to be treated as being subject to SDLT higher rates. Para 9 of Sch. 4ZA effectively deems the purchaser’s spouse as party to the transaction provided the following:

  • the purchaser (or one of them) is married or in a civil partnership on the effective date,
  • the purchaser and the purchaser’s spouse or civil partner are living together on that date, and
  • the purchaser’s spouse or civil partner is not a purchaser in relation to the transaction.

Regarding Schedule 4ZA, those who are married or are in civil partnerships are treated as living together. If they are treated for section 1011 of the Income Tax Act 2007, you can find more in the Stamp Duty Land Tax Manual.

Para 9(2) requires the following conditions of Para 3 to be applied to each spouse. If either spouse meets all the conditions A to D, the purchase will be subject to the higher rates of SDLT.


 

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