UK: Residential Stamp Duty Land Tax Increases

Last Updated: 1 February 2016
Article by Dagmara Selwyn-Kuczera

In the Autumn Statement the Chancellor of the Exchequer announced that higher rates of stamp duty land tax (SDLT) would be introduced for purchases of "additional residential properties".

The measure is intended to re-focus the housing sector towards low-cost home ownership for first-time buyers. For purchases after 1 April 2016 an additional rate of 3% SDLT will be payable where an owner of residential property purchases additional property. It is anticipated that the most common "additional residential properties" purchases, attracting the higher rates, will be second homes and buy-to-let properties. The new rules, as envisaged, will result in a substantial increase on the overall SDLT payable on such purchases.

The details of the new rules have not been finalised yet and draft legislation is yet to be announced. The government is currently inviting responses to a consultation on the changes which is due to close on 1 February 2016.

Higher Rates

The new rates will be 3% above the present SDLT rates for residential property. They will be charged on the portion of the value of the property that falls into each band.

  • Transactions under £40,000 do not require a tax return to be filed with HMRC and are not subject to the higher rates.
  • £40,000 to £125,000: 3%.
  • £125,001 to £250,000: 5%.
  • £250,001 to £925,000: 8%.
  • £925,001 to £1.5 million: 13%.
  • Over £1.5 million: 15%.


Broadly, the higher rates will apply to transactions involving property not acquired as the purchaser's main residence for which completion takes place on or after 1 April 2016. They will not apply to contracts exchanged prior to 26 November 2015.

The government has said that whether a property constitutes a main residence will be judged on the facts and that in determining these "facts" HMRC will consider factors including the locations of schools/workplaces, voting registration, correspondence addresses and the degree of furnishings and moveable possessions.

So as not to penalise buyers who experience a temporary overlap between the purchase of a new main residence and the sale of a previous one, the intention is that the new rates will be payable on the purchase but if the previous "main" residence is then sold within 18 months of the purchase then the extra SDLT paid will be refunded.

It will not be possible to elect a property as a main residence for SDLT purposes (as it is for capital gains tax).


Although the new higher rates will apply to all non-main residence residential properties they will not apply to acquisitions of caravans, mobile homes or houseboats.

Non-UK Residents

It is intended that non-UK residents will be subject to the new SDLT rates in the same way as UK residents. The main residence test will therefore take into account all properties held by a purchaser globally in order to establish the purchaser's worldwide main residence. The higher rates will therefore be payable on any non-resident's purchase of a UK property which does not satisfy the test.


The proposal is that the main-residence test will apply to all the purchasers of a residential property, so that if any joint-purchaser (including spouses and civil partners) will own more than one property after the purchase and is not replacing their main residence then the additional rate will be payable.


The government's current intention regarding trusts is that if a beneficiary has a right to occupy a property or a right to receive income from it, he or she will be treated as owning the property when applying the main residence test for the additional SDLT rates. It is likely that trustees of discretionary trusts will be liable to pay the higher rates on a property purchase regardless of whether property is owned by the class of beneficiaries.

Corporate Bodies and Funds

There is understandably concern amongst corporate bodies, developers and funds who invest in residential property as to how these new rules will effect them. The government is considering an exemption from the higher rates for those making significant investments in residential property. It is yet unclear how "significant investment" will be construed. The government had indicated that the exemption will only apply to purchasers who own a portfolio of more than 15 residential properties. However, in its consultation it has suggested that instead this relief may only apply on the bulk purchase of at least 15 residential properties. If this new approach is adopted, it will not be relevant that a property owner already has a significant property portfolio. The exemption will not be available on subsequent residential property purchases.

The government has, however, confirmed that it does not intend to draw mixed-use properties (charged to SDLT at the non-residential rates) within the scope of the new additional rates.


The government intends that multiple dwellings relief (MDR) will remain available for the new higher rates of SDLT. This will mean that where multiple residential properties are purchased in one transaction, where some or all of them are additional properties, they will be eligible for MDR, with the higher rates applied to the average property price not the combined purchase price.

In addition, for purchases of 6 or more residential properties in the same transaction, the purchaser may qualify for non-residential rates. Therefore, the purchaser of multiple properties should be able to elect whether MDR with the higher rates will apply or the non-residential rates, which are capped at 4%, depending on which will provide the more favourable outcome.


With 1 April 2016 looming ever closer, purchasers should be preparing for the additional rate. However with HM Treasury's consultation period not due to close until 1 February and no draft legislation published significant uncertainty remains. There is however unlikely to be leniency in the current climate.

This article was written by Dagmara Selwyn-Kuczera, Partner, Real Estate, with assistance from Freya Marks, Trainee Solicitor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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