In this budget briefing we have focussed on the SDLT changes which bring additional complexity for residential property transactions.

SDLT: higher rates on purchases of additional residential properties

From 1 April 2016, higher rates of SDLT will be charged on purchases of additional residential properties e.g. second homes, holiday homes and buy to let properties. The higher rates will be 3% above the current SDLT rates.

If, at completion, an individual owns two or more properties and has not replaced their main residence, the higher rates will apply. Buyers will then have 36 months to either claim a refund from the higher rates or before the higher rates will apply, in the event that two properties are owned.

Companies buying residential properties

Companies purchasing residential property will always be subject to the 15% rate of SDLT, including on the first purchase of a residential property. There are no special exemptions. However, the higher rate for additional residential properties will not apply in circumstances where the company is subject to the 15% rate. Reliefs for the purpose of the 15% rate of SDLT do not apply for the higher rates for purchases of additional residential properties. So, if a relief from the 15% rate of SDLT is available, the higher rates for purchases of additional residential properties will still apply.


Where contracts were exchanged on or before 25 November 2015 and the purchase completes on or after 1 April 2016, the higher rates will not apply. However, in certain circumstances, these transitional provisions will not apply e.g. if a contract is varied after 26 November 2015 so that the higher rates will still apply.

Otherwise, for property transactions completed after 31 March 2016, the new rates will apply.

What do the higher rates apply to?

The higher rates will not apply to purchases of:-

  • non-residential or mixed use properties;
  • where the purchase price is less than £40,000;
  • caravans, houseboats and mobile homes;
  • properties outside England, Wales and Northern Ireland; and
  • inherited property (but certain rules apply).

What is a main residence?

The rules require the dwelling disposed of to be the Buyer’s only or main residence at some time during the period of three years before the purchase.

If an individual resides at more than one dwelling, all of the facts and circumstances of the particular case will be considered to conclude which residence is the main residence. The main residence is not necessarily where the individual spends the majority of their time although it will usually be. HMRC have published a list of points to consider:-

  • if the individual is married or in a civil partnership, where does the family spend its time?
  • if the individual has children, where do they go to school?
  • at which residence is the individual registered to vote?
  • where is the individual’s place of work?
  • how is each residence furnished?
  • which address is used for correspondence?
  • where is the individual registered with a doctor/dentist?
  • at which address is the individual’s car registered and insured?
  • which address is the main residence for correspondence?

The test in respect of the new dwelling purchased is a question of intention i.e. does the Buyer intend the dwelling to be his only or main residence at the time of purchase? The test is met not only if there is intent to immediately occupy, but also if some works are undertaken before occupation commences. If the dwelling is intended to be put to an additional use e.g. to rent out, the test is not met. The guidance does say that there may be rare cases where the Buyer’s “genuine intention” at the time of sale may be “frustrated by events”.

Joint purchasers

There are interesting special rules if a residential property is being purchased by joint purchasers. If there are two individual purchasers and the conditions are met for one of them only, the transaction will be charged at the higher rates. This applies whether a residential property is purchased as joint tenants or tenants in common. It does not matter how small the intention of a particular Buyer is, the test is applied in the same manner.

A partner in a partnership will be treated as a joint Buyer of land bought by or on behalf of the partnership. The tests will need to be applied in respect of all of the partners and if any one partner would be liable to the higher rates, then the whole purchase will be so liable.

Mixed use property

Where an individual buys six or more dwellings in a single transaction, the Buyer can choose whether to apply the non-residential rates of SDLT. Interestingly, the higher rates do not apply to purchases which contain both residential and non-residential elements e.g. a shop with a flat above.


If a previous main residence is sold within three years of paying higher rates on a new main residence, a refund is available by making an amendment to the original return.

SDLT rate changes for commercial and mixed property

The SDLT rates structure for sales of and grants of leases in, non-residential and mixed property have increased.

The effect of the changes are that, for sales and grants of leases of such property, the same or less SDLT will be payable if the non-rental consideration is £1.05 million or less and, in the case of SDLT on rent, leasehold transactions with an NPV of up to £5 million will pay the same SDLT as under the current rate structure. However, for higher value transactions, the SDLT charge will increase:-

Click here to view the table.

A new 2% rate for rent consideration paid on the grant of a lease is introduced from 17 March 2016. The new rates for rent consideration are as follows:-

Click here to view the table.

Under transitional rules, these measures do not have effect in relation to a transaction if the Buyer elects and either of the following apply:

the transaction is effected in pursuance of a contract entered into and substantially performed before 17 March 2016; or
the transaction is effected in pursuance of a contract entered into before that date and, broadly, it has not been varied, sub-sold or assigned on or after 17 March 2016.

Key announcements in respect of business

Capital Gains Tax (CGT)

From 6 April 2016, the higher rate of CGT will reduce from 28% to 20% and the lower rate will reduce from 18% to 10% (but this does not apply to residential properties that are not a Buyer’s home)

Corporation Tax

From April 2020, corporation tax is reduced to 17% – this will benefit over a million companies according to the Government and will be the lowest tax rate in the G20.

Tax breaks for micro-enterprises

Micro-entrepreneurs who sell goods or rent out their homes through the Internet will benefit from a new £1,000 tax allowance.

Those with relevant incomes above the £1,000 allowance can benefit by simply deducting the allowance instead of calculating their exact expenses.

Business Rates

From April 2017, Small Business Rate Relief will increase from £6,000 a year to £15,000. According to the Government, half of all businesses will see their Business Rates fall. The Chancellor also announced that future Business Rates increases will be based on CPI rather than RPI, leading to more accurate rates bills for retailers


Entrepreneurs relief

Entrepreneurs’ relief will be extended to long term investors in unlisted companies. This will provide a 10% rate of CGT for gains on newly issued shares in unlisted companies purchased on or after 17 March 2016, provided they are held for a minimum of three years from 6 April 2016, and subject to a separate lifetime limit of £10 million of gains.