What Stamp Duty Land Tax (SDLT) rate applies for the purchase of a second home? What is the SDLT higher rate? Are there any reliefs from the SDLT higher rate?

This is a freeview guide. Subscribers can view a detailed guide here.

At a glance

  • From 1 April 2016 a higher additional 3% surcharge is added to the basic rate of SDLT on the purchase of
    • An additional dwelling by an individual. 
    • A dwelling purchased by a company. 
  • Where the property will fall within the Annual Tax on Enveloped Dwellings (ATED) regime, the purchase of a property costing more than £500,000 by a company will be subject to 15% SDLT and the 3% surcharge cannot apply.
  • Properties outside England and Northern Ireland are not subject to SDLT but are relevant in considering whether the higher rates apply.
  • There are special rules for trusts and beneficiaries.

What are the higher rate SDLT rates and bands?

What's new?

Between July 8 2020 to 31 March 2021 a temporary reduced rate applies for both basic SDLT and higher rates due to the coronavirus. See SDLT: Summer economic update.

What do the higher rates apply to?

The higher rate only applies to purchases of major interests in dwellings.

While the definition of a dwelling is related to the definition of a residential property (for SDLT) it has not got the same meaning.

A dwelling includes:

  • Buy-to-lets.
  • Holiday homes even if there are restrictions on use.
  • Furnished Holiday Lettings.
  • Residential accommodation for school children or the armed forces.

The following are not treated as dwellings and the higher rate charge does not apply:

  • Non-residential properties, including children's homes, purpose-built accommodation for students in higher education, care homes, hospices, prisons, hotels, inns (or similar establishments).
  • Properties costing less than £40,000.
  • Caravans, houseboats and mobile homes.

SDLT FAQs

  • Is land a dwelling?
  • Can a field be grounds?
  • What about annexes and subsidiary dwellings?
  • Can a derelict property be a dwelling?

See Subscriber Guide: SDLT Residential Property/what is a dwelling?

Multiple Dwellings Relief (MDR): Purchase of more than one dwelling

  • Where two or more dwellings are purchased in a single transaction, Multiple Dwelling Relief (MDR) can be claimed.  
  • Where six or more dwellings are purchased in one transaction, the purchaser can choose whether to apply MDR and the higher residential rates or apply the non-residential rates with no MDR.

What does HMRC say about mixed-use properties?

  • Where a property is in mixed-use, the whole transaction is subject to the lower commercial rates of SDLT.
  • Where only a distinct part of the building is used and suitable for use as a dwelling, that part will be residential property and the mixed-use provisions will apply.

See What is residential property for SDLT?

Is there any relief if a property is purchased for use as a dwelling in a trade?

Yes, but only in limited circumstances. See Subscriber Guide: SDLT Residential Property Higher Rates

Married couples

  • Married couples and civil partners are a single unit and can only own one main residence between them at any one time for the purposes of the higher rates.
  • You may be liable for the higher rates if your spouse has an existing residential property.
  • If the new and existing properties are the main residence the higher rate may be refunded if the existing property is sold within three years.
  • There are special rules for separation and divorce. See Subscriber Guide: SDLT Residential Property Higher Rates

Joint ownership

If two or more people own or purchase property jointly, if any of the joint purchasers has two or more properties at the end of the transaction date and they are not replacing a main residence, the whole of the consideration is subject to the higher rates of SDLT.

Special rules for business partners

When a partnership in which you are a partner owns a dwelling used for the partnership’s trade. 

Special rules for inherited properties

  • SDLT is not payable on inherited properties, but they do have to be taken into account when purchasing a new property.
  • Inherited interests can be ignored in certain situations.
  • See Subscriber Guide: SDLT Residential Property Higher Rates

What is classed as my main residence?

  • There is no main residence election for SDLT. HMRC will determine which is your main residence based on the facts and may consider a broad range of indicators. See Subscriber Guide: SDLT Residential Property Higher Rates

What are the conditions for relief if I am replacing my main residence?

Links

SDLT: Residential property (dwellings): higher rate
A guide to the SDLT higher rate charge on residential property, when it applies and what reliefs are available.

SDLT: Annexes and Multiple Dwelling Relief
What is multiple dwellings relief? When does it apply and how is it claimed?

SDLT: Linked transactions

What are Linked Transactions? When does do Linked Transaction rules apply for SDLT? How do I calculate SDLT on a linked transaction?


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