Changes to Stamp Duty Land Tax as a result of the Budget 2016

Those hoping that the Chancellor would do a last minute U-turn on Stamp Duty Land Tax (SDLT) changes will have been disappointed with yesterday’s budget. Not only will a higher rate of SDLT be payable on the purchase of a second residential property from 1 April 2016, the Chancellor introduced some additional alterations to the SDLT regime in respect of mixed-use/commercial purchases.

Higher rate on second residential properties

As advised in the Chancellor’s Autumn Statement, from 1 April 2016, a surcharge of 3% will be payable on top of the normal SDLT rates for any purchases of a second residential property where contracts have not been exchanged before 26 November 2015. The definition of second residential property includes joint ownership and ownership of residential property outside England and Wales. In addition, the extra SDLT applies to bulk purchases made by large investors.

Where an individual is replacing his/her main residence, the extra 3% SDLT will not be payable provided (a) the main residence has already been sold or (b) the sale completes on the same day as the purchase of the new property. If for any reason there is a delay in the sale of an individual’s main residence (i.e. there is a delay in completion) resulting in the person owning two residential properties even for a short period of time, the additional SDLT remains payable. However, the seller will be entitled to a refund of the additional SDLT provided that she/he sells his/her main home within 36 months of the purchase of the new main residence.

Thus, the SDLT rates for additional residential properties are:

Purchase Price	SDLT Rate
Up to £125,000	3%
Over £125,000 to £250,000	5%
Over £250,000 and up to £925,000	8%
Over £925,000 and up to £1.5 million	13%
Over £1.5 million	15%

The 15% rate of SDLT continues to apply on residential purchases of more than £500,000 by certain corporate bodies.

Changes to commercial rates of SDLT

A surprise element of yesterday’s budget was that the Chancellor altered the SDLT rates on the purchase of commercial/mixed use land. Where previously there were four ‘slab’ bands of SDLT ranging from 0% to 4%, for all contracts exchanged on or after 17 March 2016, there are now three tiered bands, those being:

Purchase Price/Premium	SDLT Rate
Up to £150,000	0%
Over £150,000 to £250,000	2%
Over £250,000	5%

Where exchange occurs before 17 March 2016 but completion occurs after, the purchaser will be able to choose whether to pay SDLT in accordance with the old or new rules.

In respect of new leasehold properties, SDLT remains payable both on the premium and the Net Present Value (NPV) of the rent. However, here again, the Chancellor has introduced tiered SDLT bands as follows:

NPV of Rent	SDLT Rate
Up to £150,000	0
Over £150,000 to £5,000,000	1%
Over £5,000,000	2%

A point worth noting, VAT continues to be applicable when determining the consideration on which SDLT is payable.

The above is a brief outline of the alterations to the SDLT regime. For more detailed information, including what the changes mean to your transition, please contact Brenna Baye – Associate, or any member of our Property Team.

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

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