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Budget 2016 Stamp Duty Land Tax changes

Commercial Property

The Stamp Duty Land Tax (SDLT) charged on purchases of non-residential properties and transactions involving a mixture of residential and non-residential properties is to change with effect from 17 March 2016 from the existing “slab” rate structure to a “slice” rate structure. This will bring it into line with the existing regime for residential property. The new rates and thresholds for freehold purchases and lease premiums are:

Transaction value band Rate
 £0   - £150,000 0%
£150, 0001 - £250,000 2%
£250,001 and over 5%

When comparing the new rates with the existing rates, purchasers will be better off under the new rates when the purchase price of the property is below £1,050,000. To protect purchasers that have exchanged contracts before 17 March 2016 purchasers will have a choice of whether the old or new rates will apply and should therefore take the option to use the old rates if the purchase price is above this amount.

For new leasehold transactions, SDLT is already charged at each rate on the portion of the Net Present Value (NPV) of the rent which falls in each band. On or after 17 March 2016 a new 2% rate (which is a 1% increase on the current rates) will apply where the NPV of the rent is above £5 million. The new rate bands and thresholds for the NPV of rent paid under a lease are:

net present value of rent Rate
£0 - £150,000 0%
£150,001 - £5,000,000 1%
£5,000,000 and over 2%

Second home Stamp Duty Land Tax (SDLT) grab

From 1 April 2016, an additional 3% SDLT charge will apply to purchases of additional residential properties, such as second homes and buy-to-let properties.

This will apply where, at the end of the day of purchase, an individual owns 2 or more properties and has not replaced their main residence. Purchasers will have 36 months to reclaim the higher rate of SDLT paid where there is a period of overlap or a gap in ownership of a main residence which is a welcome extension from the proposed 18 month period of grace.

Married couples who are living together will be treated as one unit and therefore will only be able to have one property between them before the higher rates apply. A couple who are separated will however each be able to own a property without the higher rate applying.

In a less welcome move there will be no exemption from the charge for either significant investors or for corporate purchasers. These purchases will therefore also be subjected to the higher rates.

An exemption will, however, apply for properties purchased for less than £40,000, caravans, mobile homes and houseboats, which will not be subject to the higher rate.

Where property is inherited, no SDLT is payable. For the purposes of counting the number of properties owned, a share not exceeding 50% in a property, which has been inherited within the last 36 months, can be ignored.

 

 

Date: 17th March, 2016
Author: Chris Hadley

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