Stamp Duty Land Tax

It was announced as part of the Budget measures that the higher rates of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties will increase to 5% (from 3%) for transactions with an effective date on or after 31 October 2024.

This applies to individual purchases of additional residential property such as buy to let properties and second homes in England and Northern Ireland. The higher rate does not usually apply to individuals who own one residential property irrespective of the intended use of the property. However, individuals might be required to pay the higher rates even if they plan to live in the property they are purchasing and do not own another residential property. This is because the rules apply not just to the buyer, but also to anyone they are married to or purchasing the property jointly with. The measure also increases the single rate of SDLT payable by companies and other non-natural persons when purchasing residential properties worth more than £500,000, from 15% to 17%.

Temporary changes were made by the previous government in September 2022 to various SDLT bands reducing the amount of SDLT payable for many buyers. No SDLT is currently payable for first-time buyers making a purchase of up to £425,000 (£300,000 prior to 23 September 2022). The relief also applies to the first £425,000 (£300,000 prior to 23 September 2022) for purchases up to £625,000 (£500,000 prior to 23 September 2022). There is no SDLT relief available for first-time buyers spending more than £625,000 (£500,000 prior to 23 September 2022) on a property. No extension to these temporary changes was announced as part of the Budget measures so these figures are now expected to revert back to the old limits on 31 March 2025 as planned.

In addition, the SDLT zero rate band was increased from £125,000 to £250,000 from 23 September 2022. This resulted in the removal of the 2% band for properties ranging from £125,000 to £250,000. These changes are also temporary and set to revert back to the old limits on 31 March 2025.

The higher rates of Stamp Duty Land Tax (SDLT) were introduced on 1 April 2016 and apply to purchases of additional residential property such as buy to let properties and second homes. The higher rate is 3% higher than the regular SDLT rates and applies to the purchase of additional residential properties valued at over £40,000.

The higher rates of SDLT apply to purchases of additional residential properties in England and Northern Ireland. The higher rate does not apply to individuals who own only one residential property, irrespective of the intended use of the property.

You might be required to pay the higher rates even if you plan to live in the property you are purchasing even if you do not own another residential property. This is because the rules apply not just to you (the buyer), but also to anyone you are married to or purchasing the property jointly with.

Multiple Dwellings Relief (MDR) was an SDLT relief which had benefitted purchasers of multiple residential properties. However, MDR was abolished for transactions which complete, or substantially perform on or after 1 June 2024.

The Scottish Land and Buildings Transaction Tax (SLBTT) applies to transactions where the land is situated in Scotland. There is a 6% SLBTT supplement for purchases of additional residential properties.

Similarly, the Welsh Land Transaction Tax (WLTT) applies to transactions where the land is situated in Wales. There is a WLTT higher rate supplement of 4% on purchases of additional residential properties.

It was announced as part of the Spring Budget 2023 that Multiple Dwellings Relief (MDR) was being abolished. This change has now come into effect for transactions which complete, or substantially perform on or after 1 June 2024.

The MDR relief applied to property purchasers who bought more than one dwelling where a transaction or a number of linked transactions included freehold or leasehold interests in more than one dwelling. This was a valuable tax relief that could substantially reduce the amount of SDLT due. The government’s view was that the MDR no longer achieved its original aims in a cost-effective way and consequently the relief has been abolished.

MDR for transactions before 1 June 2024

You can claim MDR when you buy more than one dwelling if a transaction (or a number of linked transactions) includes freehold or leasehold interests in more than one dwelling. This applies to transactions where:

• contracts were exchanged on or before 6 March 2024;
• contracts were substantially performed before 1 June 2024; and
• contracts complete before 1 June 2024.

These transactions are subject to various exclusions.

Stamp Duty Land Tax (SDLT) is payable whether you buy a freehold property, a new or existing leasehold property or a shared ownership property. SDLT has been replaced in Scotland by the Land and Buildings Transaction Tax and in Wales by the Land Transaction Tax.

The amount of SDLT you pay when you buy a leasehold property, depends on whether it’s an existing lease (an assigned lease) or a new one. There are also different amounts of SDLT payable depending on whether you are buying residential or non-residential property.

SDLT is usually payable when you buy a property through a shared ownership scheme run by an approved public body.

This includes:

• local housing authorities
• housing associations
• housing action trusts
• the Northern Ireland Housing Executive
• the Commission for the New Towns
• development corporations

Buyers of these properties can choose to make a one-off payment based on the market value of the property (‘market value election’) or pay the SDLT due in stages.

The rules are complex and the amount of SDLT depends on many different factors. If you require any further assistance, we can help.

The Annual Tax on Enveloped Dwellings (ATED) came into effect from 1 April 2013. The tax applies to certain Non-Natural Persons (NNPs) that own interests in dwellings valued at more than £500,000. These provisions affect most companies, partnerships with company members and collective investment schemes.

For the purposes of the ATED, it is immaterial whether the company, partnership or collective investment scheme is incorporated or resident in the United Kingdom. HMRC’s technical guidance on the subject states that, a company that is not incorporated or resident in the UK, but which owns land in the UK that constitutes a ‘single-dwelling interest’ is subject to ATED provisions and is required to make returns.

There is no ATED or ATED-related Capital Gains Tax payable if an individual owns a property directly, rather than through a company. There are also reliefs available, for example, if a property is in use for the purposes of a property rental business, run commercially, and with a view to profit (subject to certain exceptions) or held by a charity for its charitable purposes, subject to meeting various conditions.

From 1 April 2023, ATED is chargeable on property valued at:

• More than £500,000 but not more than £1 million – £4,150
• More than £1 million but not more than £2 million – £8,450
• More than £2 million but not more than £5 million – £28,650
• More than £5 million but not more than £10 million – £67,050
• More than £10 million but not more than £20 million – £134,550
• More than £20 million – £269,450

If the relevant property was within the scope of ATED on 1 April 2023, both the return and payment are due by 30 April 2023 for the ATED period 1 April 2023 to 31 March 2024.

There can be penalties for late filings, late payment or for an inaccurate return. Taxpayers can appeal a decision of HMRC, for example against a penalty or determination. Appellants have 30-days from the date of the decision to write and tell HMRC the grounds on which they are appealing.

Over the past few years, there have been some interesting opportunities for making claims for Stamp Duty Land Tax (SDLT) refund claims. It should be noted that to be successful, these claims must meet quite specific criteria. For example, there may be scope for landlords and property investors to recover the 3% SDLT surcharge on the basis that a residential property was uninhabitable at the time of purchase. This could be because the home had no kitchen, bathroom, heating or was missing a roof. There is also the possibility of claiming Multiple Dwellings Relief (MDR) where multiple residential properties were bought as part of a linked transaction. 

HMRC has published a press release warning homeowners about cold calls from rogue tax repayment agents advising them to make speculative SDLT refund claims. HMRC is likely to raise enquiries on these claims. If this is after the agent has taken their fee, the homeowner may be liable to pick up the difference. Incorrect refund claims must be repaid with interest, and potentially facing penalties.

HMRC has nine months to enquire into a claim and would look to recover the full tax, with interest, and penalties charged where appropriate from those found to be incorrect. 

We would strongly recommend that anyone interested in receiving further information about making a claim or who are contacted ‘out of the blue’ about a Stamp Duty refund claim should seek our advice. Interestingly, HMRC give the same advice in their press release suggesting ‘anyone approached about a Stamp Duty refund claim should check with their original conveyancer, take independent professional advice and check HMRC’s guidance by searching ‘Stamp Duty Land Tax’ on GOV.UK.

The Welsh government has announced that it is increasing the maximum amount that local authorities can charge as a council tax premium on second homes and long-term empty properties from 100% to 300%. The new policy is set to come into effect from April 2023 and will enable councils to decide the level which is appropriate for their individual local circumstances. The government has also said that councils will be able to apply different premiums to second homes and long-term empty dwellings.

The government said that it is introducing this change to help councils raise additional funding which will ideally be used to improve the supply of affordable housing.

The Welsh government will also change the criteria for self-catering accommodation being liable for business rates, instead of council tax, from April 2023. Currently, properties that are available to let for at least 140 days, and that are actually let for at least 70 days, will pay rates rather than council tax. The change will increase these thresholds to being available to let for at least 252 days and actually let for at least 182 days in any 12-month period.

Government figures show there were almost 24,000 chargeable second homes in Wales registered for council tax purposes in January 2022. Most local authorities no longer give any discounts to long-term empty or second homes.

Stamp Duty Land Tax (SDLT) is a tax that is generally payable on the purchase or transfer of land and property in England and Northern Ireland. It is also payable in respect of certain lease premiums. You may also need to pay SDLT when all or part of an interest in land or property is transferred to you and you give anything of monetary value in exchange.

There are important issues to consider if you transfer land or property between unmarried couples and other joint owners. HMRC’s guidance on the subject states as follows:

You do not pay SDLT if 2 or more people jointly own property (as joint tenants or tenants in common) and you divide it physically and equally and own each part separately. But, if one person takes a bigger share, or all of the other’s share, and pays cash or some other consideration in exchange, you must tell HMRC. If the amount you pay is more than the current threshold, you will pay SDLT.

Joint owners (this may include unmarried couples who are splitting up) may agree that one of them will take over ownership of a property they bought together, including any outstanding mortgage.

In this case the person taking ownership will pay SDLT on the total chargeable consideration of the following (either or both), if it exceeds the SDLT threshold:

• any cash payment that one of the couple makes to the other for their share
• the proportion of the outstanding mortgage that belongs to the share of the property being transferred

Stamp Duty Land Tax (SDLT) is a tax that is generally payable on the purchase or transfer of land and property in England and Northern Ireland. Wales and Scotland set their own Stamp Duty taxes. It is also payable in respect of certain lease premiums. You may also need to pay SDLT when all or part of an interest in land or property is transferred to you and you give anything of monetary value in exchange.

There are important issues to be aware of if you transfer land or property to a company. HMRC’s guidance on the subject states as follows:

When property is transferred to a company, SDLT may be payable on its market value, not the consideration given. For example, if a property has a market value of £200,000 but the company only pays a consideration of £100,000, SDLT will still be payable on £200,000.

This applies in either of the following situations, the:

• person who transfers the property is ‘connected’ with the company – the definition of a connected person covers relatives and people who have some involvement with the company,
• company pays for the property with shares in the company (partly or wholly) to the person making the transfer, where that person is connected to the company (but not necessarily the acquiring company).

Holding properties within a limited company can have many advantages such as lower Corporation Tax rates and tax relief on interest payments. However, it is important to be aware of issues that can arise including the payment of SDLT or regional equivalents.

If you are considering transferring property to a company, please take professional advice before completing the transaction.