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Stamp Duty Land Tax – Additional Rate Guidance

As part of our work we will prepare the Stamp Duty Land Tax return for your purchase. It is important to note that the Stamp Duty Land Tax return is self-assessed. Before the return is submitted to HMRC we will send it to you for confirmation that the information contained in the return is correct. The purpose of this note is to provide guidance as to when the additional rate of Stamp Duty Land Tax will apply.

An additional rate of Stamp Duty Land Tax is payable when an individual buys an additional residential property. The additional rate is 3% above the standard rate of tax. The additional rate will apply when at the end of the completion day all of the following conditions are met:-

Condition A – the purchase price of the additional property is £40,000 or more;

The chargeable consideration for the property must be £40,000 or more. Consideration doesn’t have to take the form of money for example; it can include an assumption of debt or the provision of services.

Condition B – the dwelling purchased is not subject to a lease which has more than 21 years left to run on the date of purchase;

The majority of residential purchases will be of a property which is not subject to a lease which has more than 21 years left to run on the date of purchase.

Condition C – the purchaser owns an interest in another dwelling which has a market value of £40,000 or more and is not subject to a lease which has more than 21 years to run at the date of purchase of the new dwelling

It is important to note that “owns an interest” will include another property (or properties) owned or being treated as owned by a spouse or a partner in a partnership (although there are limited special exemptions for this). Property situated outside of England and Wales will be included in this. Owning an interest will include a beneficial interest (i.e. where a property has held for your benefit in trust). The value of the interest in the other property must be over £40,000 also.

Condition D – the dwelling being purchased is not replacing the purchaser’s only or main residence.

For condition D to apply, two parts must be satisfied:-
- There must be a disposal of the purchaser’s or their spouse’s previous main residence and
- The dwelling acquired must be intended to be occupied as the individual’s only or main residence.

If the additional property purchased is to eventually replace your main residence, you may be able to obtain a rebate for the additional 3% rate of tax paid to HMRC.

You should be able to obtain the rebate if the following criteria are met:-
  • The property purchased was intended to replace your main residence;
  • You later dispose of the main residence which you have replaced;
  • The disposal of the original main residence is within three years ending on the completion date of the purchase of the replacement.
This information is intended as a guide only and is not intended to be relied upon as legal advice. This guidance is based upon the Stamp Duty Land Tax rules as at April 2016. If you have any queries, you should contact us. You should also let us know if your circumstances in relation to your tax liability change during your transaction (for example; if you inherit a property or you get married and your spouse has an interest in another property).

Further guidance is also available from HMRC and you may find their following link helpful:- https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/509184/GuidanceNote_Final.pdf
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The professional rules relating to solicitors' firms, including the Code of Conduct can be accessed on the website of the Solicitors Regulation Authority at www.sra.org.uk

Allington Hughes Law is a trading name of Allington Hughes Limited. Registered office is 10 Grosvenor Road, Wrexham LL11 1SD

Registered in England and Wales. Company registration number 07831162.

Authorised and regulated by the Solicitors Regulation Authority number 597867

V.A.T. registration number 166 8213 93