In the Autumn Statement the Chancellor announced a new 3% surcharge on ‘additional properties’ including second homes (even if the first home is not in the UK) and buy-to-let properties, with effect from 1 April 2016.
For purchases over £40,000 the new rates will be as follows:
| Band | Existing SDLT rates | New rates |
| £0-125k | 0 | 3% |
| £125-250k | 2% | 5% |
| £250-925k | 5% | 8% |
| £925k-1.5m | 10% | 13% |
| £1.5m+ | 12% | 15% |
The rules will not apply in certain circumstances.
- Certain types of property, e.g. caravans, mobile homes and home boats
- Certain types of investor e.g. funds which make substantial investment – there will be a HMRC consultation on this
- Timing:
- Contracts pre-26 November 2015 completing post-1 April 2016 which are not varied before completion;
- Contracts pre-26 November 2015 substantially performed pre-1 April 2016 (even if completion is post-1 April 2016);
- Contracts post-26 November 2015 where substantial performance and/or completion is pre-1 April 2016;
- “Substantial performance” can bring the time of the land transaction forward i.e. pre completion; to do this the buyer must take possession of the whole or substantially the whole of the property, and/or pay the whole or substantially the whole of the purchase price.
Residential additional accommodation rates
The table below shows the effect of the new rates on a range of residential additional accommodation.
| Purchase Price | Existing SDLT | New SDLT |
| £125k | 0 | £3.75k |
| £200k | £1.5k | £7.5k |
| £250k | £2.5k | £10k |
| £300k | £5k | £14k |
| £350k | £7.5k | £18k |
| £400k | £10k | £22k |
| £450k | £12.5k | £26k |
| £500k | £15k | £30k |
| £600k | £20k | £38k |
| £700k | £25k | £46k |
| £800k | £30k | £54k |
| £900k | £35k | £62k |
| £1m | £43.75k | £73.75k |
| £1.25m | £68.75k | £106.25k |
| £1.5m | £93.75k | £138.75k |
| £2m | £153.75k | £213.75k |
What behaviour will the changes generate?
- Given the top rate is now 15%, there is now no effective penalty to using a company (either based in the UK or off shore e.g. Jersey) to own the real estate, and combined with the Finance Act changes to interest relief, using such a company may now be the most tax efficient route for larger purchases.
- Will there be a rush to buy before April 2016? Very possibly.
- Will purchasers seek discounts to purchase prices to pass the costs to sellers? Perhaps post-1 April 2016.
- There may be a trend for would be buy-to-let landlords who have paid a reservation fee for an off-plan development, but not exchanged, to walk away from the purchase if discounts cannot be negotiated, as they would otherwise bear the extra cost.
- Will Landlords club together? There will be a Government consultation concerning corporates and funds which hold a large number of properties e.g. 15 or more, as to whether they should be exempt from the increases, as it is seen as important not to take such investors out of the picture. Private landlords may yet be able to put themselves in a similar position as such funds and be exempt if they club together and meet any necessary conditions.
- Will more funds be launched? It is possible that developers may launch their own buy-to-let funds to allow individual landlords to own the equivalent of an apartment without the extra SDLT charges.
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