SDLT for the Individual Purchaser: which rates apply to my residential property purchase?

Insight

03.04.2023

Whilst there remains only one “commercial” rate of stamp duty land tax (SDLT) there are now four “residential” rates of SDLT that can apply to the acquisition of a residential property, three of which can apply to individuals. The applicable rates depend on the purchaser’s individual circumstances and intentions. This briefing summarises the rates and their application to individual purchasers of English residential property.

Standard rates

The standard rates of SDLT for residential properties are as follows:

Amount of the purchase price	SDLT Rate (Standard)
The first £250,000	Zero
From £250,0001 to £925,000	5%
From £925,001 to £1.5 million	10%
Above £1.5 million	12%

Purchasers who own no other property or are replacing their only or main residence will be subject to the standard rates of SDLT when purchasing a residential property.

Higher rates for additional dwellings

The higher rates of SDLT are a 3% increase on each band of the standard rates, as follows:

Amount of the purchase price	SDLT Rate (Higher)
The first £250,000	3%
From £250,0001 to £925,000	8%
From £925,001 to £1.5 million	13%
Above £1.5 million	15%

It is a common misconception that the higher rates apply to all individual purchasers who own another residential property. In practice, they apply where:

individuals are acquiring a freehold or long leasehold residential property,
the property being acquired is not subject to a long lease and the consideration is over £40,000,
the buyer already owns a residential property that meets the same conditions, and
the buyer is not replacing their only or main residence.

This means that individuals who own no other residential property are subject to the standard rates and individuals who own a number of buy-to lets can still be subject to the standard rates if the transaction is the replacement of their main residence. Conversely, an individual who owns one or more investment properties but who rents their own residence will always be liable for the higher rates, putting them at a relative disadvantage to someone who owns their own home but is otherwise in the same situation. The application of the main residence exemption is described in further detail here.

Where there is more than one purchaser, the test for whether the higher rates applies needs to be considered separately for each purchaser in a transaction. The result is that if the higher rates apply to one purchaser, the entire transaction will be subject to the higher rates. Individuals who are married or in a civil partnership are treated as a unit for the purposes of the higher rates and will therefore also need to consider whether their spouse owns residential property.

Importantly, the test for whether the higher rates applies is not restricted to UK property ownership. If a purchaser owns residential property anywhere in the world (potentially including as a beneficiary of a trust) then the higher rates may apply.

Non-resident surcharge

Irrespective of whether the higher or standard rates apply to a purchase, non-resident purchasers of freehold or long leasehold properties pay an additional 2% SDLT in addition to the existing standard or higher rate charge as shown in the table below.

Amount of the purchase price	SDLT Rate (Standard with non-resident surcharge)	SDLT Rate (Higher with non-resident surcharge)
The first £250,000	2%	5%
From £250,0001 to £925,000	7%	10%
From £925,001 to £1.5 million	12%	15%
Above £1.5 million	14%	17%

The surcharge is relevant to individuals who have not been present in the UK for 183 non-consecutive days in the 365 days before the date of their purchase. Individual purchasers can reclaim the surcharge if they subsequently spend 183 non-consecutive days in the period beginning 364 days before their purchase and ending 365 days after their purchase.

As with the higher rates the test is applied to each purchaser in the transaction so where one individual meets the test the entire transaction will be subject to the surcharge. This is modified for married couple or those in a civil partnership. Provided one spouse is UK resident, the entire transaction is treated as UK resident.

The key takeaway is that the test for whether an individual is non-resident for SDLT purposes is not necessarily related to their nationality, citizenship or tax residence status. An individual can therefore be considered UK tax resident under the usual tests but non-resident for the purposes of the SDLT surcharge. A more detailed analysis of the non-resident surcharge is discussed here.

If you require further information about anything covered in this briefing, please contact Katjana Cleasby or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.