Does the 2016 Stamp Duty surcharge apply to me?

From 1st April, a new 3 per cent surcharge to Stamp Duty Land Tax will be introduced in the UK for buyers of additional residential properties, including buy-to-let investments and second homes. But does it apply to you? Our Q&A guide is here to help.

What is the 3 per cent surcharge?

The 3 per cent surcharge will be added to existing Stamp Duty Land Tax rates for those who purchase additional residential property in the UK.

When does it come into effect?

The surcharge will take effect from 1st April 2016, following an announcement in both the Chancellor’s 2015 Autumn Statement and the 2016 Budget. It will apply to any transaction that has not been completed by midnight on 31st March 2016, unless you had already exchanged before the 25th November 2015 Autumn Statement announcement.

Who has to pay the new Stamp Duty surcharge?

The surcharge applies to anyone who buys a second residential property – i.e. an additional property that is not your main residence – in England, Wales and Northern Ireland. The government estimates around 90 per cent of residential property transactions in England, Wales and Northern Ireland will not pay the higher rates of SDLT.

How is the 3 per cent calculated?

Unlike the current Stamp Duty system, which is tiered in proportion to house prices, the surcharge applies to the entire price of a home. This will then be added to the traditional SDLT fee. If you purchased a property for £240,000, for example, you have to pay Stamp Duty of £2,300, plus a surcharge of £7,200 – a total of £9,500.

What if I am selling my home and buying a new one

If your home directly replaces your main residence, then you will not have to pay the 3 per cent surcharge.

I had to buy my new home before selling my old one. Do I still pay the surcharge?

Sometimes, a period of overlap when moving home is unavoidable. If you buy a residential property before you sell your old one, you will have to pay the new 3 per cent surcharge – but if you sell your old home within 36 months of completing the purchase of your new home, you can claim a refund.

Does the 3 per cent apply to corporate investors?

Yes. Chancellor George Osborne announced in the 2016 Budget: “There will be no exemption from the higher rates for significant investors, and the surcharge will apply equally to purchases by individuals and corporate investors.”

I’m legally married – does it matter if my partner owns a home, even though I don’t?

All married couples and civil partners will be treated by the Treasury as one unit, so if either of you own a property already, the purchase of another home will count as an additional residence and therefore be subject to the 3 per cent Stamp Duty surcharge.
However, if you are living separately in conditions that are deemed likely to become permanent, you will be considered as divorced for the purposes of rate calculation and will therefore not have to pay the 3 per cent surcharge.

I own a home but I’m purchasing another with a first-time buyer. Will I have to pay the higher Stamp Duty?

Yes – the prospective jointly-owned property still counts as an additional property, so it will attract the surcharge.

I’m a parent and I own a home. Can I buy another one with my child without the higher Stamp Duty?

No – because you already own a home, the purchase will count as an additional property and will be subject to the surcharge.

What if I inherit a home?
Stamp Duty is not applicable to inherited homes, so the surcharge will also not apply. If you go on to purchase a home without selling that inherited property, though, you will have to pay the higher rate of Stamp Duty on the new home.

I own a home overseas. Do I have to pay the Stamp Duty surcharge?

Yes, even if you own a home outside of the UK, any purchasers of additional residential properties in the UK will have to pay the higher rate of Stamp Duty.

Will I have to pay a higher Stamp Duty rate in Scotland?

Scotland has a different tax system to the rest of the UK: it charges Land and Buildings Transaction Tax on transactions, rather than Stamp Duty Land Tax, although they effectively both operate in the same way. From 1st April, there will also be a 3 per cent surcharge to LBTT on any purchases of additional residential properties.

Are there any exceptions?

There are some conditions in which you will be exempt from paying the 3 per cent Stamp Duty surcharge. If your second home costs under £40,000, you will not be subject to the fee, while caravans, houseboats, mobile homes and houseboats. Timeshare agreements are not subject to Stamp Duty. Social landlords and charities will also not be charged the higher rate of Stamp Duty.