Residential: increased SDLT on additional properties

Taxing times

20 September 2016

Robert Walker considers the implications of the recent increase in stamp duty land tax on additional residential properties

Following an initial announcement in the Autumn Statement on 25 November and subsequent consultation, legislation has increased the rates of stamp duty land tax (SDLT) that apply to purchases of additional residential properties, such as second homes and buy-to-let properties, from 1 April 2016.

Legislation has increased the rates of stamp duty land tax that apply to purchases of additional residential properties

Scope of the rules

An additional 3% applies where, as a result of the acquisition of UK residential property, an individual purchaser has more than 1 residential property, anywhere in the world. The additional 3% also applies to all acquisitions of UK residential property by companies and other 'non-natural persons'.

There is an exception for individual purchasers acquiring a UK property to replace an existing main residence disposed of in the last 3 years. Where such a residence has not yet been disposed of, the additional 3% will need to be paid upfront and then reclaimed if that existing residence is sold within 3 years.

The requirement to be replacing an existing main residence results in inconsistencies in the treatment of taxpayers in arguably similar positions. For example, a buy-to-let investor moving out of rented accommodation into their first home will pay the extra 3%, whereas a buy-to-let investor who already owns their own home and is replacing it will not be liable.

Where the additional 3% applies, the SDLT rates are as shown in Table 1.

Purchase Rate
Up to £125,000 3%
More than £125,000 and up to £250,000 5%
More than £250,000 and up to £925,000 8%
More than £925,000 and up to £1.5m 13%
More than £1.5m 15%

Table 1: SDLT rates on additional residential properties by price


Where a purchaser is acquiring a main residence and an annex such as a granny flat and that annex can be used as a separate dwelling, the initial proposal was that the additional 3% SDLT may apply to the entire transaction – that is, both the main residence and the granny flat.

Following significant public pressure, the government has agreed to relax these provisions, and it is probable that the transaction will incur the additional 3% only where the annex represents a third of the total value of the property or more. However, at the time of writing, the amended legislation has not yet been published.


Notwithstanding previous indications that there might be an exemption for significant investors in residential property, no such exceptions have been introduced. The Chancellor has ignored calls from industry for such a measure, saying that the case was not compelling and that housing development will remain attractive for investors.

He is hoping that the changes will not hamper housebuilding in the UK, which could be the case if investors feel that the tax burden on residential development is becoming too high.

[The Chancellor] is hoping that the changes will not hamper housebuilding in the UK

Some investors will, however, be relieved to hear HMRC has confirmed that purchases of 6 or more properties in bulk will still be treated as a non-residential transaction subject to SDLT at the lower commercial rates and outside the scope of the 3% surcharge. It will be interesting to see whether developers will start to design cluster flats that can be easily bought in parcels of 6 by commercial investors to avoid the higher rates.

Where 6 or more properties are acquired, there is a decision to be made between claiming multiple dwellings relief (MDR) and paying the additional 3% on top of the usual residential SDLT rate or treating the transaction as commercial and paying commercial rates.

Where the average unit price in the transaction is less than £333,000 it is likely to be worth claiming MDR and paying residential rates, and where the average unit price is greater than £333,000 it is likely to be preferable to treat the transaction as commercial and apply commercial rates.

Student housing is outside the definition of dwelling for the purposes of the 3% SDLT and so is not subject to it. It is, however, within the definition of dwelling for the purposes of MDR; so for multiple acquisitions of student houses or flats, MDR can continue to be claimed based on normal residential SDLT rates.


Note that since 1 April 2015, land in Scotland is not subject to SDLT and is instead taxed under the separate Scottish land and buildings transaction tax, for which similar additional 3% rules have also been introduced.

Robert Walker is Partner and Real Estate Tax UK Network Leader at PricewaterhouseCoopers LLP

Further information

This feature is taken from the RICS Property journal (July/August 2016)