The Autumn Statement included a radical change to the way SDLT is charged on residential properties:
- The old “slab” basis (charging a flat % of SDLT on the entire consideration) is gone. We now have a more progressive system where the consideration is charged at different % rates depending on how much falls within certain bands.
- The rates of SDLT have changed:
£0 to £125,000 = 0%;
Over £125,000 to £250,000 = 2%;
Over £250,000 to £925,000 = 5%;
Over £925,000 to £1.5m = 10%; and
Over £1.5m = 12%.
For those purchasing properties for £937,500 or less, the changes should be beneficial and result in less SDLT.
The more progressive system should also eliminate the “cliff edge” effect which was produced by the old SDLT system (there is now, for example, no SDLT reason why a property cannot be acquired for £251,000).
But the SDLT on purchasing high value dwellings could now be extremely high. It should also be borne in mind that the punitive 15% rate of SDLT for high value dwellings acquired by companies continues to apply.
One of the most interesting things about the change is how swiftly it has been introduced, coming into effect only hours after the delivery of the Autumn Statement and with no significant consultation.
Although there are some “grandfathering” provisions (allowing some contracts already exchanged to benefit from the old rules), many will be stuck with the new regime. They may be particularly interested in the possibilities of acquiring multiple properties simultaneously, which could drive down the SDLT chargeable by virtue of:
- the SDLT relief for the acquisition of multiple dwellings;
- non-residential property acquired together with the dwellings in a linked transaction all being treated as mixed use so chargeable at 4%;
- or purchasing six or more dwellings being treated as “non-residential” for SDLT purposes.