If you already own at least one property and you buy a residential property in England or Northern Ireland, you may have to pay the stamp duty land tax (SDLT) surcharge. This can significantly add to the cost of buying a property.
Higher rates of land and building transaction tax (LBTT) apply to the purchase of second and subsequent residential properties in Scotland, while higher rates of land transaction tax (LTT) apply in Wales.
Higher Rates of SDLT
Higher rates of SDLT are payable on the purchase of a residential property where the consideration is at least £40,000 if all of the following apply:
- The property will not be the only residential property worth at least £40,000. Overseas properties are also taken into account in applying this test.
- You have not sold or otherwise disposed of your previous main residence.
- No one else has a lease with at least 21 years to run on the property.
The higher rates only apply to residential property – they do not apply to property that comprises both residential and non-residential elements, or to commercial property. In addition, the higher rate does not apply where the main residence is exchanged, for example, if someone who has a buy-to-ley property sells their main home and buys a new home.
Where the higher rates apply, SDLT is payable at an additional 3% on the residential rates.
The higher rates will typically apply where a person purchases and investment property or a second home.
Land and builds transaction tax (LBTT) is payable on property purchases in Scotland. An additional dwelling supplement is payable on the purchase of additional dwellings in Scotland, such as buy-to-let properties and second homes. The supplement adds an additional 4% to the standard residential LBTT rates.
As with SDLT, it is not payable where the main residence is exchanged.
Land transaction tax (LTT) applies in Wales. As with SDLT, the higher rate of LTT applies where a personal purchases a residential property worth at least £40,000 and they already own at least one residential property. The exception is on the exchange of a main residence. The higher rate adds 3% to the standard residential rates.
Partner note: FA 2003, s. 55A; Land and Buildings (Transaction) Tax (Scotland) Act 2015, s. 26A; Land Transaction Tax (Tax Bands and Tax Rates) (Wales) Regulations 2018 (SI 2018/128), Table 2.