In December 2015 HM Treasury issued a Consultation Document providing details of the proposal to charge an additional 3% Stamp Duty Land Tax (SDLT) on purchases of additional residential properties. The intention to levy an additional 3% SDLT had been announced in the Spending Review and Autumn Statement on 25 November 2015.

The stated intention behind this measure was to use some of the additional tax collected to provide £60m for communities in England where the impact of second homes is particularly acute. Furthermore it was suggested that the higher rates of SDLT will deter people from purchasing additional properties and therefore create greater scope for people to purchase their first home.

In the Budget on 16th of March, George Osborne (the Chancellor of the Exchequer) announced that the proposal to levy higher rates of SDLT will go ahead as planned from 1 April 2016 but there were a few changes to the original proposals.

The higher rates will apply to most purchases of additional residential properties in England, Wales and Northern Ireland where, at the end of the day of the transaction, individual purchasers own two or more residential properties and are not replacing their main residence.

Where someone has more than one property and disposes of a main residence, it was proposed that they would have 18 months to buy a new main residence, before the higher rates of SDLT apply assuming they retain their additional property. If someone buys a new main residence before disposing of their previous main residence they are entitled to a refund from the higher rates of SDLT if they dispose of their previous main residence within 18 months.

The good news is that the 18 month period has been extended to 36 months. For those people who sold their main residence before the announcement of the higher rates on 25 November 2015, they have until 26 November 2018 to acquire their replacement main residence. Furthermore those who have inherited a small (50% or less) share in a single property within the 36 months prior to the purchase of a main residence will not be liable to the higher rates of SDLT

The original consultation document proposed that married couples would be treated as one unit. Couples who were formally separated would be treated as separate individuals The revised proposals recognises that if a couple separate they do not always have a formal separation granted by deed or by the courts. Consequently married couples will not be treated as one unit if they are separated in circumstances which are likely to be permanent.

Unfortunately the SDLT proposals confirm or announce a number of items disappointing news.

Non UK property

Foreign residential properties must be taken into account in deciding whether the property being acquired is an additional property. So a person coming to England from abroad and who has retained their foreign property will pay the higher rates of SDLT on acquiring a property here.

Property bought by companies

All corporate purchases of residential property will be caught for the higher rates. The original proposal to allow an exemption from the higher rates for bulk purchases of 15 properties or more has been withdrawn. However where at least 6 dwellings are being acquired, it is possible to claim multiple dwellings relief which may mitigate the higher charge to a limited extent.

Furnished holiday lets will be treated in the same way as other residential properties.

Purchases by property renovators will be treated in the same way as property purchases made by others.

Trust Acquisitions

On trust acquisitions, the position is that for bare trusts and life interest trusts, the higher rates will apply if the property being acquired is an additional property for the beneficiary. All residential property purchases by discretionary trusts will be liable to the higher rates.

In conclusion

The higher rates of SDLT represent yet another tax assault on residential property. Some of the rules are likely to run counter to the stated policy objectives of increasing the supply of housing for people who want to purchase a home. No doubt the policy aim was swamped by the prospect of raising additional tax revenue – plus ça change!

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Michael Goldstein - Partner


T +44 (0)20 7874 8805

Michael advises entrepreneurs and families in business on every aspect of their tax position. His understanding of both business and personal tax issues enables him to provide a complete tax perspective at all ages and stages. He has particular experience in advising owners of businesses with acquisitions and disposals, succession issues and share based incentives. He also advises High Net Worth Individuals on tax matters, often including consideration of international issues.

Michael has written articles on tax matters for a number of professional journals and is a member of the Taxation Faculty of the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Tax Advisers and the Society of Trust and Estate Practitioners.

When he’s not working, Michael enjoys travel relaxing with a good book (usually on a political or historical theme) and listening to music. He also has a keen interest in investment matters.

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