stamp duty additional property
16th January 2020 by Property Deal Store Administrator in Investors, Legislation

Extra Stamp Duty on Additional Properties

Here we are going to explore everything you need to know about the higher Stamp Duty rates that apply to investors owning multiple residential properties.

Firstly, what is an ‘additional property’?

Simply put, if you own or have an interest in a property already (anywhere in the world), even if that’s your main home, you will pay a higher rate of Stamp Duty on any subsequent properties that you buy. The same applies if you’re married and your partner has an interest in another property, even if you are not going to own any of the properties together.

So, if you’re a property investor, you’re almost always going to pay the higher rates on all additional properties that you buy.

Stamp Duty Land Tax (SDLT) higher rates

The higher rates represent a 3% surcharge on top of the standard SDLT rates. Here is what you will have to pay:

SDLT higher rate

(Source: https://www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property)

Stamp Duty works like most other taxes in that you don’t pay a flat 8% on properties over £250,000 to £925,000 for example – you move through the purchase price bands and apply all applicable rates.

So, for a property purchased at £260,000, your SDLT would be calculated as follows:

(Source: https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro)

When the higher rates don’t apply

Properties bought for less than £40,000 aren’t subject to the higher rate.

There’s also different rules for properties that are a mixture of residential and non-residential – for example a retail unit with a flat above it.

Moveable homes such as caravans and houseboats are also not subject to the higher rates of Stamp Duty.

Reliefs are also available if you are buying ‘multiple dwellings’ such as a block of flats with six units or more. You can apply for something called multiple dwellings relief or alternatively you can choose to pay the non-residential Stamp Duty rates rather than the higher rates.

For properties that are bought by trusts, companies or partnerships, different rules also apply. More information can be found here: gov.uk.

If you plan to move into the new property

If you want to move into the new property and rent out your existing main residence the higher SDLT rates will still apply.

To avoid paying the higher rate you would have to sell your existing main residence so you can’t get around the extra tax that way.

If you do decide to sell your main residence you need to do so prior to completing your new purchase in order to avoid the higher SDLT. Alternatively, you can pay the higher rate and then claim the extra tax back if you sell your previous residence within three years.

Consult an expert

As with all things tax, it pays to consult a specialist, especially if you have a particularly complex situation or the property you’re interested in doesn’t represent your usual sort of deal.

If you’re in the market for your next investment property, that’s where we come in!

Property Deal Store is the place that connects property sourcers to property investors.

Sourcers negotiate and build deals before publishing them on the site for investors to purchase.

This is the platform the industry has been crying out for and we have created this website with a clear mission in mind: To be the go-to platform for investors to build a successful property portfolio whilst facilitating the development of a successful career in property sourcing for our sourcers.

You can check out all of our latest deals here and sign up for free today so that we can keep you up to date as new deals are added.

If you have any questions or simply want to find out more, call us on 01282 711561 or email office@propertydealstore.co.uk.

-Janice Minihan, director and co-founder of Property Deal Store