The additional SDLT rate payable of 3% on additional properties purchased took effect from 1 April 2016.
To avoid the 3% surcharge, you had to complete on the purchase of a second residential property by midnight on 31 March 2016. That is unless you previously exchanged on or before 25 November 2015.
You’re liable to pay the 3% surcharge even if the home you already own (or part-own) is abroad.
Since the end of 2014, regular Stamp Duty has been charged as a tiered tax. This is like income tax, where you only pay the higher rate on the slice above any threshold. However, the 3% surcharge still works as a slab tax which means it applies to the entire purchase price of the property.
Please note that you won’t pay the 3% surcharge on second homes that cost under £40,000. Caravans, mobile homes and houseboats are also exempt.
One other important point to note is that if you are charged Capital Gains Tax on any profit you make on the sale of an additional home, the 3% surcharge can be offset against your CGT bill – see article CGT on residential property
If the second home you are buying is for your child and you already own a home, you will be liable for the 3% surcharge if your name is on the property deeds – even if it’s joint with your child’s name. If you bought the home for your child outright and just their name was on the deeds, the 3% surcharge would not apply.
If you have a second home and you are buying jointly with your partner who doesn’t already own, the 3% Stamp Duty surcharge will still apply.
Just as if you were buying for your child, you may be able to avoid the surcharge in this case, by putting the property entirely in the name of the person who doesn’t already own a home.
If the home you are buying directly replaces your main residence, you will not have to pay the 3% surcharge, even if you own an additional home at the same time. If you do buy this new main residence before selling the old one, you will be required to pay the SDLT, but can claim a refund for the SDLT paid (as long as you sell the second home within 3 years of purchasing the new one).
If you sell your main residence before buying a new one, you will also have 3 years (after completing on the sale) during which time you can buy a new main residence without being hit with the surcharge.
No SDLT is payable on properties that are inherited, so the 3% premium is not relevant. However, if you have inherited a property and go onto purchase a second home without selling it, you will be hit with the surcharge.
Setting up a limited company will not help you to avoid the 3% surcharge.
There is also an additional 1% SDLT surcharge for non-UK residents buying UK residential property – see article SDLT – new rate for non-residents