Increase In Stamp Duty Land Tax For Residential Property In England
In support of home ownership for first time buyers, it was announced in the Chancellor’s autumn statement 2015 that additional stamp duty land tax (SDLT) would be payable on second homes and buy-to-let purchases where contracts were exchanged on or after 25 November 2015 and would complete on or after 1 April 2016. It is expected that the additional tax will be used to double the affordable housing budget and provide £60 million for communities in England where the impact of second homes is particularly acute.
Consultations are still underway and it is expected that details of the proposals will be announced in the Budget on 16 March 2016, with response to ongoing consultation and draft legislation to be issued immediately after the Chancellor’s statement.
Under the consultation, an additional 3% SDLT would be charged. Currently, SDLT is only payable for properties over the value of £125,000 but under the new proposals, the minimum threshold will reduce to £40,000.
Where a purchaser is replacing his or her main residence, but the previous property has not yet been sold, it is anticipated that the transaction would be subject to the higher rate but a refund would be available if the previous main residence is sold within 18 months. Individuals would not be able to elect their choice of main residence; instead, HMRC (Her Majesty’s Revenue and Customs) will take into account a number of factors when considering this point, including but not limited to where the individual and family spend their time, where the individual works, and where they are registered to vote.
Married couples, civil partners and joint purchasers would be subject to the additional rates where either of them already own residential property.
The increased rates are not expected to apply to corporate bodies that make ‘significant investments’ in residential property. The definition of ‘significant investment’ is expected to be clarified following the Chancellor’s statement along with details of any other additional reliefs.
Given the uncertainties of the exact proposals and in anticipation of the impending changes, purchasers should be alert of the risk of their transaction completing after 31 March 2016, and where possible, seek to complete before this date.
For newly built properties where a notice to complete is imminently due to be served, purchasers may seek to negotiate a reduced notice period with the seller. However, where mortgage finance is being obtained, purchasers should also consider the requirements and timescales of their lender, particularly whether a reduced notice period is acceptable.
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