Government guidance on who must pay higher Stamp Duty rates

The government has issued guidance on who must pay the higher rates of Stamp Duty Land Tax (SDLT) when buying a residential property in England.

The basic position is that you will be liable for the higher SDLT rates when you buy a residential property (or a part of one) for £40,000 or more, if all the following apply:

• it will not be the only residential property worth £40,000 or more that you own (or part own) anywhere in the world
• you have not sold or given away your previous main home
• no one else has a lease on it which has more than 21 years left to run.

You may have to pay the higher rates even if you intend to live in the property you’re buying (and regardless of whether or not you already own a residential property).

This is because the rules do not apply only to you (the buyer), but also to anyone you’re married to or buying with.

The rules apply to you both as if you were buying the property together, even if you’re not.

If either of you individually have to pay the higher rates, you must pay the higher rates for the transaction as a whole (unless you’re permanently separated).

What property the higher rates apply to

When you know who the rules apply to, you should work out how many residential properties each of you will own at the end of the day of your new purchase.

If any of you will own, or part own more than one residential property worth £40,000 or more, you will have to pay the higher rates on your new purchase (unless there is another reason why the higher rates do not apply).

Include any residential property that:

• is owned on behalf of children under the age of 18 (parents are treated as the owners even if the property is held through a trust and they are not the trustees)
• you have an interest in as the beneficiary of a trust.

 Include your current home, if you still own it at the end of the day you buy your new home. 

The higher rates from 8 July 2020 to 31 March 2021

The higher rates from 1 April 2021

These rates also apply if you bought a property before 8 July 2020.

When the higher rates do not apply

The higher rates do not apply to certain people, property and transactions.

 People

 Do not include anyone who will both:

•  use the new property as their main home
• have sold or given away the last main home they owned before you buy your new home (or on the same day).

 Property

 Do not include property (or part of a property) if any of the following apply:

•  the property is worth less than £40,000
• it’s a mixture of residential and non-residential (like a shop with a flat above it)
• it’s ‘moveable’ like a caravan, houseboat or mobile home (unless it has become a permanent fixture).

The rules also do not apply to property you lease if either:

•  your lease is for 7 years or less (on the date it was granted)
• the lease is owned by someone else and it has more than 21 years left.

 Transactions

 If you’re transferring ownership (or part ownership) of a residential property to your spouse, the higher rates do not apply as long as no one else is involved in the transfer. 

If you want to increase the amount of a property that you already own, you do not have to pay the higher rates when all the following apply:

•  you already own 25% or more
• the dwelling has been your only or main home for the previous 3 years
• if you’re extending a lease, your lease still has 21 years or more left to run.

 Reliefs you may qualify for

 You may qualify for a ‘relief’ that reduces the amount of SDLT you have to pay, for example, multiple dwellings relief.

 If you’re buying 6 or more properties, you can choose to pay either the:

•  non-residential rates of SDLT (not the higher rates)
• higher rates using multiple dwellings relief.

 What you need to do

 Your SDLT return must be sent to HMRC within 14 days of the ‘effective date’ of the purchase.

 Pay your bill

 You can pay your SDLT bill as soon as your return has been sent to HMRC.

 When and how to get a refund

 If you sell or give away your previous main home within 3 years of buying your new home, you can apply for a refund of the higher SDLT rate part of your Stamp Duty bill.

 You cannot get a refund if you or your spouse still own any part of your previous home.

 Properties sold on or before 28 October 2018

 If you sold your previous main residence on 28 October 2018 or earlier, a refund must be claimed within whichever comes later out of:

•  3 months of the sale of the previous main residence
• 12 months of the filing date of the SDLT return relating to the new residence.

 Properties sold on or after 29 October 2018

 If you sold your previous main residence on 29 October 2018 or later, a refund must be claimed within 12 months of whichever comes later out of the:

•  sale of the previous main residence
• filing date of the SDLT return relating to the new residence.

 Exceptional circumstances

 You may still be able to apply for a refund if you purchased your new home on or after 1 January 2017 and were unable to sell your previous home within 3 years. To be able to get the refund, the delay in selling must be because of reasons outside of your control. These may be, but are not limited to:

•  the impact of coronavirus (COVID-19) preventing the sale
• an action taken by a public authority preventing the sale.

 Once the reason has ended, you must sell the previous home to be able to apply for the refund.

Please contact Dipak Odedra or Gurjit Dhadar if you would like advice about the legal aspects of buying or selling a home.