The Higher Rates for Stamp Duty Land Tax (SDLT) came into force on 1st April 2016. The higher rate is calculated as a 3% surcharge on the standard rates and applies to all purchases of a second residential dwelling unless an exemption applies.
How will you know whether you will have to pay the higher rate for stamp duty land tax?
First, it is important to understand that the higher rate only applies to residential dwellings, and not to commercial properties or land (unless the land in question has a residential dwelling on it). A dwelling includes holiday homes, e.g. cottages or flats, but not caravans, houseboats or mobile homes.
A dwelling can also be anywhere in the world. So, if you own a residential property abroad, and then buy one here, you could find yourself liable for the higher rate.
An exemption that will generally apply is if you are replacing your main home, which is being disposed of. So, if you own the house that you live in, and a flat that you rent out, and you sell your home you live in and buy a new one which you live in as your main home, then even though you will own two residential dwellings, you will only pay the basic rate of SDLT. However, if you own an investment flat, and rent your home under a tenancy agreement, if you then buy a house to live in because you are not disposing of your home, you will, unfortunately, have to pay the higher rate.
How does stamp duty land tax work for couples in civil partnerships and married couples?
It is also important to note that married couples, or those in civil partnerships, are treated as a single person by HMRC for SDLT purposes. What does this mean?
Imagine you and your spouse or civil partner are buying a house. You do not own any other property. Your spouse/civil partner, however, owns a small investment flat that is rented out. You, therefore, decide to buy the house in your sole name. HMRC will look at whether your spouse or partner would have to pay the higher rate if he/she bought the house. If the answer to that is yes, then, unfortunately, you will be charged the higher rate.
However, unmarried couples are treated individually for SDLT purposes by HMRC, and therefore in our example above, if your partner owns the investment property but you do not, you could then proceed with your purchase in your sole name, and only pay the normal rate.
If I buy a new home before I have sold my old one, do I have to pay stamp duty land tax?
In these circumstances, as long as you lived in your old home for 3 years leading up to the purchase of the new home, then although you will be liable to pay the higher rate SDLT, assuming that you sell that first home within 3 years of your purchase of the new one, you may be able to claim back some or all of the additional SDLT that was paid.
It is all too easy to fall foul of HMRC’s complex rules and find yourself with draconian penalties. At Morrish Solicitors LLP, our team of specialist property lawyers will be able to give you the expert advice that you need.
Transfer of property due to divorce, separation, or end of a civil partnership
You do not pay Stamp Duty Land Tax (SDLT) if you transfer property or land to your partner as part of a court order or an agreement or because you are either:
- Dissolving a civil partnership
- You do not pay SDLT if the partners either:
- Legally separate
- Annul their marriage
Frequently asked questions about Stamp Duty Land Tax
Do I have to pay Stamp Duty Land Tax if I receive property or land from a will?
You will not pay Stamp Duty Land Tax (SDLT) if you receive property or land from a will and there is no need to tell HMRC about it.
Do I have to pay Stamp duty Land Tax if I receive property or land as a gift?
If there is no outstanding mortgage on the property/land you will not have to pay Stamp Duty Land Tax (SDLT).
Do I have to pay Stamp duty on a second home?
This table applies to anyone buying a house (completed) before March 31st, 2021 and does not include, mobile homes, caravans, or houseboats.
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