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It was announced at the Autumn Budget that the SDLT surcharge payable (a) by individuals on purchases of additional residential properties (e.g. second homes or buy-to-lets), and (b) by companies that acquire any residential property has been increased from 3% to 5% from 31 October 2024. The surcharge applies in addition to the standard residential rates of SDLT.
Whilst the changes apply to land transactions with an “effective date” (typically meaning completion date) on or after 31 October 2024, under the draft legislation, it has been proposed that the new 5% surcharge will not apply to land transactions which exchanged before 31 October 2024, provided they are not excluded. The draft legislation explains that a land transaction is excluded if, on or after 31 October 2024:
- There is any variation of the contract, or assignment of rights under the contract
- The transaction is effected by the exercise of any option, right or pre-emption or similar right; or
- There is an assignment, subsale or other transaction relating to the contract which results in a person other than the purchaser under the contract becoming entitled to call for a conveyance.
In other words, under the proposed draft legislation, with the exception of an excluded land transaction, if a contract for a purchase of a residential property was exchanged before 31 October, but the transaction does not complete until after that date, the old surcharge rate of 3% should still apply.
It was also announced that the single rate of SDLT payable by companies and non-natural persons acquiring dwellings for more than £500,000 will be increased from 15% to 17% from 31 October 2024.
Legislation will be introduced in Finance Bill 2024-25.
There is still plenty to digest as we work through all the changes and technical points. We will continue to provide updates on specific taxes and planning opportunities over the course of the next few weeks. Please contact a member of the Tax, Trusts & Succession team for more information and formal advice.
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