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Agricultural Update - Residential Properties Stamp Duty Land Tax Changes

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25 February 2016

The Autumn Statement introduced a Stamp Duty Land Tax (SDLT) surcharge to apply from 1 April 2016 on the acquisition by individuals or trusts of a dwelling regarded as an “additional residential property”. That is to say, the individual or trust already owns a residential property.

Effect of the surcharge

The surcharge will add an additional 3% to the rate of SDLT on acquisition of a residential property. Therefore, the rate on properties of £125,000 and below will increase from 0% to 3%, on properties of £250,000 and below the rate will increase from 2% to 5%, and so on.

In addition to the surcharge that will apply to the acquisition of a residential property by an individual or an interest in possession trust, the surcharge will also apply to all purchases of residential property by companies, commercial partnerships and trustees of discretionary trusts.

Main residence relief

An individual replacing their main residence will be able to claim relief and not pay the surcharge if the replacement is bought within 18 months after the sale of the original main residence, or if a replacement is bought and then the old main residence is sold within 18 months after the acquisition of the new main residence.

Possible planning

The date that properties are acquired can affect if the surcharge is due and may offer planning opportunities. In addition, “innocent” transactions may suffer the surcharge and need restructuring. For example, where a parent helps a child onto the property ladder by acquiring an interest in the child’s main residence, the surcharge rate will apply.

Married couples and civil partners are regarded as “one person” for the surcharge, but cohabiting couples can each acquire one property before the surcharge applies.

The legislation is not expected to be published until Budget Day (16 March 2016). Where individuals will shortly acquire a property which will potentially suffer the surcharge, they should ensure, where possible, that the acquisition will complete before 1 April 2016 so that the surcharge does not apply.