Higher Rate of Tax
As at 1 April 2016 the Government introduced a new higher rate of tax for the purchase of additional properties. This means that from this date, where you are purchasing another property in addition to your home, that purchase will attract a higher rate of tax.
As a purchaser, who is not a company, the higher rate will apply if:
- The price of the property is £40,000.00 or more;
- The property is not subject to a lease which has more than 21 years to run at the date of purchase.
- You are not replacing your main residence; and
- On the day of completion you own more than one property.
If you are purchasing as a company then the higher rate of tax is always payable on the purchase of any property.
In circumstances where you have to complete your purchase before you have sold your home, then as you are replacing your main residence, you will initially have to pay the higher rate of tax as you will own two properties but you will be able to apply for a refund of the additional tax paid if you sell your previous home within three years.
Where you have sold your home but do not complete your purchase at the same, the higher rate of tax will not apply as long as you are replacing your main residence.
It is irrelevant whether or not a couple is married or in a civil partnership. If a couple purchase a property together but one or both already own other properties, then any purchase acquired together will most likely be at the higher rate of tax, although any new purchase may qualify as a replacement of your name residence.
The higher rate of tax will apply where, for example, parents contribute towards the purchase of a property for the child and the property is held in trust. If the parents own their own home and then hold a share in equity of another then the higher rate will apply even though the parents are not the beneficial owner.
If you own a property abroad this will not be subject to stamp duty land tax however, but if you then acquire another property within the UK then this will be subject to the higher rate of tax.
An interest by way of inheritance is still an interest in a property. If you then purchase an additional property then this will be classed as a second home and therefore subject to the higher rate of tax.
Trustees and Nominees
Where the property is purchased in trust and held by a trustee or nominee on behalf of the beneficial owner then the beneficial owner is treated as being the purchaser for the purposes of assessing whether a higher rate of tax is payable. However, if the beneficial owner is a child, it is the trustees who are treated as the purchasers and their own interests which are assessed.