The Government announced a fundamental change to the SDLT charging system for residential property to take effect from midnight on 3 December 2014.  These changes do not affect commercial properties.  If purchasers exchange and complete on or after 4 December 2014 they will pay SDLT under the new system.  In circumstances where contracts have been exchanged before 4 December 2014 but complete on or after that date, provided there has been no variation, assignment or sub-sale (and provided completion is not effected by way of an exercise of an option or similar right) purchasers may elect in their land transaction return as to whether the old or new rules apply.

The ‘slab’ SDLT system is to be abolished, and replaced with a ‘slice’ system where each tax rate will apply only to the particular slice of the selling price to which they apply, not to the whole value of the property. The new bands are:

Click here to view table.

Please see below a number of worked examples to put this change into context (assuming for this purpose that the transactions are not linked transactions).  There is a new HMRC calculator available at http://www.hmrc.gov.uk/sdlt/calculate/calculators.htm. Be aware that the tipping point is £937,500 – at this exact price you will pay the same SDLT under the old system and the new system:

Click here to view table.

We anticipate that for most of our clients the top commercial rate of 4% will apply to most transactions with a residential element (either on the basis the property is mixed use or on the basis that the acquisition of 6 or more dwellings is treated as a commercial transaction by the SDLT legislation).  Also it is important to remember that multiple dwellings relief may also be available to reduce the SDLT. 

Please also be aware, the annual charges on the ATED will increase by 50% above inflation for residential properties worth more than £2m for the chargeable period 1 April 2015 to 31 March 2016.