The Government wants to discourage people from buying homes for investment, so it is imposing a supplementary rate of Stamp Duty Land Tax (SDLT) on such purchases. This will also affect landlords who transfer their residential property portfolio to a wholly-owned company.
The 3% SDLT supplement will apply to residential property purchases completed on and after 1 April 2016, and a similar charge will apply in Scotland from the same date. The supplement applies to the entire purchase price where that is £40,000 or more.
The SDLT supplement should not be payable where the new property is a replacement for your main home, but there is a trap to avoid. If your new home is purchased before your old one is disposed of, you may have to find the extra cash to pay the 3% supplement, then reclaim it at a point when you only own one home. The old home must be sold within 18 months of buying the new one. Properties owned in other countries will count for this test.
Your main home is the property you occupy most of the time. This may not be the property which you have nominated to be treated as your main home for CGT purposes. Married couples can only have one main home between them.
A company can’t have a main home. Where a company buys even its first residential property it will pay the extra 3% SDLT. However, the supplement may not be due where a landlord makes a bulk acquisition of fifteen or more properties in one transaction. The detailed rules on bulk acquisitions haven’t been released yet.
On a first home purchased for £250,000, the SDLT is £2,500 (2% on the excess over £125,000). On the same property purchased as a second home, this increases to £10,000: the basic charge of £2,500, plus a supplement of £7,500 (3% on the full £250,000).