Stamp Duty Land Tax on “second homes”

Stamp Duty was first introduced in 1694 during the reign of William and Mary to raise money to fight a war against the French. It was intended to be a tax on “vellum, parchment and paper” and was levied in various forms until 2003 when the Labour government introduced Stamp Duty Land Tax, a self-assessed tax on land transactions. The tax take from SDLT has risen rapidly from £3.6 billion in 2003 to over £9 billion in 2015. For a house buyer, SDLT is, invariably, the largest item of expense.

There have been many changes to SDLT since 2003. Thresholds and rates have been raised and lowered, depending upon economic and political objectives, but the biggest and most radical change came earlier this year when the former Chancellor, George Osborne, decided to introduce a 3% surcharge on purchases of “second homes”, the intention presumably being to choke off the rapidly growing “buy to let” market.

The new rules were introduced within two weeks of the March budget and with very little guidance or explanation. They have created an additional layer of complexity to the house buying process which is causing considerable concern to buyers and their legal advisors. The 3% surcharge is not intended to penalise buyers who are buying a house to replace their existing main residence but, if the new house is acquired before the sale of the old one, the surcharge has to be paid and recovered from HMRC following the sale.

The problems really arise if you are buying a property jointly with someone else who already owns a property or a share in a property elsewhere, even if that property is abroad. Even if the new property is to be a main residence for both of you, you will be required to pay the additional 3% SDLT. This will also apply if you are married or in a civil partnership and buying a property jointly where your partner already owns another property.

The 3% surcharge only applies to residential and not to commercial property or to mixed residential/commercial. There is very little guidance from HMRC as to the definition of “mixed” use but it is generally accepted that a house with an area of agricultural land or woodland falls within the definition. What the exact area must be is not clear.

The message for anyone buying a property which is not a replacement home is to seek clear advice on the SDLT implications.

This article first appeared in County Life, 30th November 2016.

Toby Pound is a partner and head of the Property department at Barker Gotelee.

Suffolk Property Solicitors – for more information on our range of legal services, please call the team on 01473 611211 or email