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STAMP DUTY AND LAND TAX ON ADDITIONAL PROPERTIES

When is comes to purchasing additional residential properties, such as second homes and buy-to-let properties, buyers now have to fork out an extra three per cent in land tax fees.

Stamp duty and Land Tax - England and Northern Ireland

How much will I pay?

As of April 2016, anyone purchasing a property in England and Northern Ireland costing £40,000 or more, which is not considered to be their main residence, must pay an increased rate of tax (or additional dwelling supplement).

Anything other than your main residence is classed as a ‘second home’ - this could be a holiday let, a property bought as an investment or somewhere you are helping another family member to buy - even if your main home is overseas. This charge does not apply to caravans, mobile homes, houseboats or plots of land.

Whilst Stamp Duty is charged on a tiered basis, the 3% surcharge effectively works as a slab tax. This means that, if you buy a second home with a purchase price of £300,000, the additional surcharge would be £9,000 (3% of the entire price). This is in addition to the £5,000 Stamp Duty bill that would need to be paid on a home of this value, bringing the total payable to £14,000.

Purchase Price

Stamp Duty %

£0 - £125,000

3%

£125,001 - £250,000

5%

£250,001 - £925,000

8%

£925,001 - £1.5m

13%

£1.5m +

15%

It is important to remember that if the property you are buying replaces your main residence, you will not be liable for the 3% surcharge, even if you own additional properties (such as a second home or a flat you rent out) at the same time.

You can use HMRC's Stamp Duty calculator to work out how much tax you will need to pay.

Joint ownership and Stamp Duty

If, however you already own a property and then jointly buy a property with a friend or partner, before selling your existing main residence, the 3% surcharge may still apply, regardless of whether your partner also owns a home or not. You may however be able to claim this back, as long as you meet the criteria terms.

Are there any exemptions?

If you purchase a new home but there’s a delay in selling your previous residence, you will still be liable to pay higher Stamp Duty rates as you’ll now own two properties. You can however request a refund for the amount above the normal Stamp Duty rates if:

  • you sell your previous main residence within three years, and
  • you claim the refund within three months of the sale of your previous main residence, or within 12 months of the filing date of your self-assessment tax return, whichever comes later.

You can apply for this online, or complete a repayment request form to print off and send to HMRC.

 

Land and Building Transaction Tax - Scotland

How much will I pay?

Like with Stamp Duty in England, an additional amount of Land and Buildings Transaction Tax (LBTT), known as the Additional Dwelling Supplement must be paid on purchases of additional properties in Scotland costing more than £40,000, where the purchaser is not replacing their main residence, such as buy-to-let properties and second homes.

Affected transactions will result in an additional 3% blanket tax being charged on the full purchase price of the transaction. For example, if you buy a second home with a purchase price of £300,000, the additional surcharge would be £9,000 (3% of the entire price). This will need to be paid in addition to the £4,600 LBTT bill that would need to be paid on a home of this value, bringing the total amount payable to £13,600.

Property Cost

Tax %

£0 - £145,000

0%

£145,001 - £250,000

2%

£250,001 - £325,000

5%

£325,001 - £750,000

10%

£750,000 +

12%

You can work out the amount of LBTT you will need to pay on your next residential property purchase with Revenue Scotland’s tax calculator.

Joint ownership and Stamp Duty

If you decide to purchase a home with a partner or a friend before selling your existing main residence, as with the rest of the UK, you will be liable to pay the additional 3% surcharge. You may be able to claim this back however, provided that you meet the below criteria.

How does the refund process work?

In the instance that ADS has been paid prior to your previous residence being sold, to qualify for a refund you must have bought a dwelling which you intended to inhabit as your main residence and; dispose of your previous main residence within an 18-month period (beginning with the day after the effective date of the next main residence purchase transaction) and; there must have been only one owner on the title deeds of the previous main residence.

You can claim a repayment for ADS via the SETS portal, by amending your original LBTT return, or by completing a repayment claim form and returning it to Revenue Scotland.

 

Land Transaction Tax - Wales

How much will I pay?

In Wales, buyers purchasing an additional residential property costing more than £40,000 will incur a 3% surcharge. Like with the rest of the UK, Land Transaction Tax (LTT) is calculated on a percentage basis.

For example, if you buy a second home for £300,000 you will pay 3% on the first £180,000, 6.5% on the next £70,000 and 8% on the final £50,000, with the total LTT fee amounting to £13,950.

You can calculate the amount of tax you will have to pay using the Welsh Revenue Authority tax calculator.

Purchase price

Stamp Duty %

£0 - £180,000

3%

£180,001 - £250,000

6.5%

£250,001 - £400,000

8%

£400,001 - £750,000

10.5%

£750,001 - £1.5m

13%

£1.5m +

15%

Joint ownership and Land Tax

If you already own a home and decide to jointly buy an additional property with a partner or a friend before selling your main residence, you are likely to be liable to pay the higher rate of tax. However, you may be able to claim a repayment if the relevant conditions are met.

How does the refund process work?

If you make your second home your main residence within 36 months of buying it (meaning you sell the first property) you will be able to claim back the higher rates you paid. This can be done by contacting the Welsh Revenue Authority and providing them with the below:

  • the Unique Transaction Reference Number (UTRN);
  • the taxpayers name;
  • the taxpayers Address;
  • your reason for a refund/amendment;
  • a description of any amendments to the return;
  • whether the amendment alters the amount of tax due;
  • the effective date of the amendment/repayment claim;
  • the amount to be repaid;
  • the name of the account holder;
  • your bank/building society account number;
  • your branch sort code;
  • the name of your bank or building society; and
  • the address of your bank or building society.

You will also need to include a declaration to confirm that you have the authority, or have been authorised to complete this amendment, on behalf of the buyer(s) and certify that the buyer(s), has/have declared that the information provided is to the best of their knowledge correct and complete.

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