View our latest Budget 2016 commentary here.


Stamp duty increase of 3% on additional properties

The measure

The introduction of higher rates of stamp duty land tax (SDLT) on purchases of additional residential property above £40,000, such as on buy-to-let properties and second homes. The higher rates will be 3% above the current SDLT rates. For example, the nil rate band will increase to 3% and the top slice of SDLT will increase to 15%. 

Relevant consideration

Current SDLT rate

Higher rate

Up to £40,000

0%

0%

Between £40,000 and £125,000

0%

3% *

Between £125,000 and £250,000

2%

5%

Between £250,000 and £925,000

5%

8%

Between £925,000 and £1,500,000

10%

13%

More than £1,500,000

12%

15%

* This rate will also be charged on the first £40,000 of consideration.

Who will be affected?

The changes will affect both domestic and foreign purchasers of additional residential property in the UK (apart from Scotland) worth over £40,000, such as buy-to-let landlords and owners of second homes.

The higher rates will not apply to caravans, mobile homes, or houseboats and the increased rates are not intended to apply to corporates and funds making significant investments in UK residential property. The government will consult on the policy detail, particularly how these exemptions will apply and whether an exemption for corporates and funds owning more than 15 properties will be appropriate.

When?

The higher rates will apply on purchases from 1 April 2016.

Our view

This measure follows hot on the heels of the restrictions on mortgage interest for residential buy-to-let-property announced earlier this year and changes to the taxation of properties held via companies.

While the intention of the measure may be to cool residential property investment and support owner occupiers by reducing the incentive to purchase additional properties, we may see a rush to complete purchases ahead of the introduction of these changes in April 2016.