This guide is a freeview at a glance guide. Subscribers see here

SDLT applies to properties in England and Northern Ireland:

At a glance

From 1 April 2016 SDLT is charged at a higher rate on the purchase of:

  • An additional dwelling by an individual. 
  • A dwelling purchased by a company. 

For individuals, the higher rate applies to your purchase if at the end of the day you buy the property conditions A to D are all met:

Condition A: The chargeable consideration for the purchase is £40,000 or more.

Condition B: On the effective date of the transaction the property you are purchasing:
(a) is not subject to a lease, or
(b) is subject to such a lease but the lease has 21 years or less left to run on it.

Condition C: At the end of the day that is the effective date of the transaction:
(a) you have a major interest in another dwelling other than the one you are buying,
(b) that interest has a market value of £40,000 or more, and
(c) that interest is not reversionary on a lease which has a remaining term of more than 21 years.

Condition D: You are not replacing your only or main residence.

For companies, any purchase of a dwelling is subject to higher rates if conditions A and B are met.

The bands and higher rates are as follows:

Band: market price £ Additional  SDLT dwellings/dwellings from 1 April 2016.
0- 40,000 0%
0 -125,000 3%
125,001 – 250,000 5%
250,001 – 925,000 8%
925,001 – 1,500,000 13%
1,500,001 and over 15%

 

  • Where the property will fall within the Annual Tax on Enveloped Dwellings (ATED) regime, the purchase of a property costing more than £500,000 by a company will be subject to 15% SDLT and the 3% surcharge cannot apply.
  • Properties outside England and Northern Ireland are not subject to SDLT but are relevant in considering whether the higher rates apply.
  • There are special rules for trusts and beneficiaries.

What's new?

See Subscriber Guide: SDLT Residential Property Higher Rates

What do the higher rates apply to?

The higher rate only applies to purchases of major interests in dwellings.

  • For a lease to be a 'major interest': it must have been originally granted for a period of 7 years or more.
  • It does not matter how long the lease has left to run.

What is a dwelling?

‘Dwelling’ takes its everyday meaning and is a building or part of a building that is:

  • Used or is suitable for use as a single dwelling, or in the process of being constructed or adapted for such use.

The definition of a dwelling is related to the definition of a residential property (for SDLT), however it has not the same meaning.

A dwelling includes:

  • Buy to lets.
  • Holiday homes even if there are restrictions on use.
  • Furnished holiday lettings.
  • Residential accommodation for school children or the armed forces.

The following are not treated as dwellings and the higher rate charge does not apply:

  • Non-residential properties, including: childrens' homes, purpose built accommodation for students in higher education, care homes, hospices, prisons, hotels, inns (or similar establishments).
  • Properties costing less than £40,000
  • Caravans, houseboats and mobile homes.

SDLT FAQs

  • Is land a dwelling?
  • Can a field be grounds?
  • What about annexes and subsidiary dwellings?
  • Can a derlict property be a dwelling?

See Subscriber Guide: SDLT Residential Property /what is a dwelling?

Multiple dwellings relief (MDR): purchase of more than one dwelling

  • Where two or more dwellings are purchased in a one transaction, multiple dwelling relief (MDR) can be claimed.  
  • Where 6 or more dwellings are purchased in one transaction, the purchaser can choose whether to apply MDR and the higher residential rates, or apply the non-residential rates with no MDR.

What does HMRC say about mixed use properties?

  • Where a property is in mixed use, the whole transaction is subject to the lower commercial rates of SDLT.
  • Where only a distinct part of the building is used and suitable for use as a dwelling, that part will be residential property and the mixed use provisions will apply

See What is residential property for SDLT?

Is there any relief if property is purchased for use as a dwelling in a trade?

Yes but only in limited circumstances. See Subscriber Guide: SDLT Residential Property Higher Rates

Married couples

  • Married couples and civil partners are a single unit and can only own one main residence between them at any one time for the purposes of the higher rates.
  • You may be liable for the higher rates if your spouse has an existing residential property.
  • If the new and existing properties are the main residence the higher rate may be refunded if the existing property is sold within three years.
  • There are special rules for separation and divorce. See Subscriber Guide: SDLT Residential Property Higher Rates

Joint ownership

If two or more people own or purchase property jointly, if any of the joint purchasers has two or more properties at the end of the transaction date and they are not replacing a main residence, the whole of the consideration is subject to the higher rates of SDLT.

Special rules for business partners

When a partnership in which you are a partner owns a dwelling used for the partnership’s trade. See Subscriber Guide: SDLT Residential Property Higher Rates

Special rules for inherited properties

What is classed as my main residence?

What are the conditions for relief if I am replacing my main residence?

  • Special rules apply depending upon the date of the transactions.

Links to our useful guides:

SDLT: Residential property (dwellings): higher rate
A guide to the SDLT higher rate charge on residential property, when it applies and what reliefs are available.

SDLT: Annexes and multiple dwelling relief
What is multiple dwellings relief? When does it apply and how is it claimed?

 

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