You’ve decided to purchase a rental property, you now need to consider the Stamp Duty Land Tax implications. The guide below is prepared to help with some of the more common questions regarding SDLT.
Please note that the rules differ where any of the following apply and these scenarios are not considered any further in this guide:
SDLT is a type of tax that is due when you purchase property in England and Northern Ireland. There are different rates for property purchased in Scotland and Wales which is not considered in this article.
If you are resident in the UK for tax purposes, already own your own home, and subsequently purchase a buy to let property you are required to pay a 3% SDLT surcharge. No surcharge will be payable where the buy to let property is the only property you own. This is reflected in the following table:
Band |
SDLT rate for UK residents | |
Purchasing first property | One or more properties already owned | |
Up to £250,000 | 0% | 3% |
£250,001 to £925,000 | 5% | 8% |
£925,001 - £1,500,000 | 10% | 13% |
Above £1,500,000 | 12% | 15% |
Examples:
When purchasing more than one 'dwelling' as part of a single transaction, or multiple linked transactions, a relief is sometimes available to reduce the SDLT due.
Further considerations:
Normal calculation | |||
Band | Consideration | Rate% | SDLT |
Up to £250,000 | £250,000 | 3 | £7,500 |
£250,001 - £925,000 | £675,000 | 8 | £54,000 |
£925,001 - £1,500,000 | £575,000 | 13 | £74,750 |
Above £1,500,000 | £500,000 | 15 | £75,000 |
£2,000,000 | £211,250 |
Multiple Dwellings Relief calculation | |||
Band | Consideration | Rate% | SDLT |
Up to £250,000 | £250,000 | 3 | £7,500 |
£250,001 - £925,000 | £675,000 | 8 | £54,000 |
£925,001- £1,000,000 | £75,000 | 13 | £9,750 |
£1,000,000 | £71,250 | ||
Multiplied by 2 | |||
(£2,000,000) | £142,500 |
The rates of SDLT payable are 2% higher for non-UK residents. However, SDLT has its own definition of residence so this may not be consistent with your tax residence for other taxes. The rules can be complex but individuals will be considered UK resident provided they are in the UK for 183 days in any 365 day period between 365 days prior to the purchase and 364 days after the purchase.
Example: a UK buy to let property being purchased for £850,000 by a non-UK resident would result in SDLT of £72,500 (assumes the 3% surcharge also applies).
It is important to ensure that your rental business is held in the correct structure and with this in mind taxpayers will often explore the possibility of purchasing rental properties within a corporate structure.
Whilst corporate purchases are normally subject to the 3% higher rates surcharge, and the 2% surcharge where the purchase is made by a non-UK resident company, they can also be subject to a penal 15% flat rate on property costing more than £500,000 unless the company is either acting as trustee of a settlement or the property is to be used for:
Where a taxpayer is seeking to purchase property within a corporate structure it is therefore important that the SDLT position is considered.
Annual Tax on Enveloped Dwellings (ATED) may also apply to companies, which is not considered further in this article.
If you need support with calculating the correct SDLT or help with the appropriate tax structure, do get in touch with Mark Stemp, Partner in our Private Clients team.
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