This is a fact sheet to address a difficult issue caused by the Government's decision to apply an additional rate of Stamp Duty Land Tax ("SDLT") to those acquiring an interest in a second dwelling when they already own an existing property or a share in one valued at £40,000 or more.
SDLT is a tax payable on the value of a property you buy and at an increasing rate dependent upon the value. There is a very useful simple guide and online calculator for SDLT on the government website here https://www.gov.uk/stamp-duty-land-tax/residential-property-rates.
However this fact sheet deals with the specific situation where someone is acquiring a second property or a share worth at least forty thousand pounds in one.
What happens is that the SDLT rules for the second purchase are modified to add 3% to each band of SDLT charge - meaning, of course, that the normal "SDLT-free" element - the first £125,000.00 will become chargeable at 3% above the normal rate (0%) so buying a £125,000.000 property as a second-home will give you an SDLT bill of £3,750.00 whereas buying the same price property when you don't have any other property interest in a dwelling worth £40,000 or more would give you an SDLT bill of £0.
We are often asked about SDLT where there is a holiday home already owned but outside England and Wales. The SDLT rule book is very clear that all property is to be taken into account including any other dwelling anywhere in the world (although presumably if your other dwelling was a mud hut somewhere exotic then it might not be worth the £40,000.00 threshold amount. If you don't declare a second home (on the perhaps not unreasonable grounds that HMRC might not find out) but you are caught out you will be awarded a criminal record and almost certainly a penalty of twice the already swingeing amount of SDLT you should have paid.
Replacing a main residence
This is a complex one. If you already have a main house and another dwelling (before the new SDLT rates came into being) you are allowed to buy a replacement for your main dwelling but still pay normal (not additional) SDLT rates for it. Note that the dwelling you buy must replace the former main residence - if you buy the new main residence but do not simultaneously sell the old one you will have to pay the additional rate SDLT but may be able to reclaim the additional charge if you then sell the former main residence within three years.
For help with SDLT issues please contact Nick Fluck via our contacts links