Stamp Duty Land Tax: Residential Property after the Autumn Statement: what happens next?
The Chancellor’s shock announcement in the November 2015 Autumn Statement that people purchasing second homes or buy to let properties would have to pay an extra 3% Stamp Duty Land Tax after 1 April 2016 sounded straightforward enough. However the detail of the proposal was not immediately available and is still not clear.
It is established that the new rates will only apply where the contract for sale was exchanged after 25 November 2015 and the transaction is completed on or after 1 April 2016. The full details of the proposal were not published in the consultation paper until 28 December 2015. The five week consultation period was very short and ran from 28 December 2015 until 1 February 2016 so is now closed. The final tax details will not be announced until the Budget on 16 March 2016.
The purpose of the consultation was ostensibly to allow consideration of circumstances in which a transaction would be subject to the higher rates, including identification of difficult cases and the circumstances where exemption from the higher rates may be justified. The paper runs to 29 pages, most of which is taken up with the policy design and it puts forward concepts such as:
- Married couples and civil partners living together (ie unless the relationship has broken down and they are separated under a court order of by a formal deed of separation executed under seal) will be treated as one unit.
- Joint purchasers: if any of them has two or more properties and is not replacing a main residence, the higher rates will apply to the entire consideration.
- Parents buying jointly with their children to help them to get onto the property ladder will be subject to the higher rates if they jointly own the property and have another main residence.
- Delay between sale of an only or main residence and purchase of a new one results in payment at the higher rate, then refund if the sale takes place within 18 months of the purchase.
- There is no ability to elect what is the only or main residence (it will be based on fact).
- Property owned outside England, Wales and Northern Ireland is relevant in determining whether property purchased in England, Wales and Northern Ireland is an additional property and therefore subject to the higher rates.
- Non-residential property will not be taken into account (this includes agricultural land, mixed use property or six or more residential properties bought in a single transaction).
- Large scale investors (at least 15 residential properties) – the government has not made up its mind whether this applies only to corporates and funds (as mentioned in the Autumn Statement) or whether to include individual investors.
- The treatment of trusts and settlements depends on the type of trusts. The higher rates will apply unless, simply put, the beneficiary of the trust is resident in the property and does not have another only or main residence, or the new property replaces the only or main residence.
- Purchase of a buy to let residential property is not subject to the higher rates unless the purchaser owns another property.
This is a complex consultation and it is clear that, when the final details are announced, many cases will require detailed consideration to decide whether the higher rates will apply. The form of the Stamp Duty Land Tax return is being redesigned and a mechanism for claiming refunds is needed.
After 1 April 2016, the SDLT rates are:
| Band | Existing residential SDLT rates | New additional property SDLT rates |
| £0* – £125k | 0% | 3% |
| £125k – £250k | 2% | 5% |
| £250k – £925k | 5% | 8% |
| £925k – £1.5m | 10% | 13% |
| £1.5m + | 12% | 15% |
*Transactions under £40,000 do not require a tax return to be filed with HMRC and are not subject to the higher rates.
What this means for you, if you are buying residential property, is that you will need to provide us with detailed information about your circumstances, in order to enable us to advise you on the tax that is payable and to complete and submit your Land Transaction Return. The accuracy of the return remains your responsibility, although if you provide your authority we will continue to submit it on your behalf, using the online submission system. Please remember that we are not able to submit your application to the Land Registry to register the transfer until the return has been submitted and the SDLT5 certificate issued and that there are penalties for late delivery, as well as interest charges and penalties for late payment of the tax. Submission of incorrect information could result in an investigation, so it is important to make sure we are aware of all relevant information. Where an understatement of the tax results from a mistake and that mistake is careless or deliberate, penalties of up to 100% of the tax understated can apply alongside other sanctions.
We are here to help you navigate the complexities of this new tax regime. In complex cases, our tax team headed by Bob Neal is able to advise on your Stamp Duty Land Tax liability and what reliefs may be available to you, such as multiple dwelling relief and whether your transaction is non-residential because the property is mixed use.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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