The Autumn Budget removes the charge to SDLT for transactions completed on or after 22nd November 2017 in England, Wales and Northern Ireland buyers on the purchase of a first property, if the purchase price is £300,000 or less. If the purchase price is between £300,000 and £500,000 the first time buyer will pay 5% on the excess over £300,000. This is a saving of £5,000 on what would have previously been paid.
First time buyers purchasing property for more than £500,000 will not be entitled to ANY relief and will pay SDLT at the normal rates.
The legislation defines a first time buyer as someone who has NEVER owned an interest in a residential property anywhere in the world AND intends to occupy the property as their main residence.
This help for first time buyers does not apply to those buying in Scotland and will cease to apply to those buying in Wales on 1st April 2018 due to the devolved power to raise land taxes.
It is a timely reminder to all who have paid the 3% surcharge which has applied since the 1 April 2016 on purchases of additional residential properties such as second homes and buy to let properties. In Scotland this is called the Additional Dwellings Supplement.
The higher rates apply to most purchases of additional residential properties where, at the end of the day of the transaction, an individual purchaser owns two or more residential properties and is not in the process of replacing his main residence.
The 3% additional rate will also generally apply to purchases of residential property by companies. In the case of joint purchasers, the higher rates will not apply where, at the end of the day of the transaction, each purchaser only owns one residential property.
The issue for the conveyancing solicitor is that often a purchase completes and the sale of the residential property is delayed, due to any number of reasons for example the purchaser pulling out at the 12 hour, but the seller decided to still complete on their new property.
In these circumstances the 3% surcharge remains payable but there is the potential to reclaim the additional tax paid if the delayed sale subsequently completes or if a new purchaser is found and the property is sold.
Under the Scottish tax system to qualify for the reclaim of Land and buildings Transaction Tax (LBTT) paid, the property sold must have been the main residence at any time during the 18 months prior to sale. In England, Wales and NI, to qualify for the reclaim, the residence sold must have been the main residence of the purchaser directly before the purchase of the new main residence. However the timescale in order to qualify for a reclaim means the purchase of the new residence can be at any time within a 3 year window.
SDLT and LBTT is dealt with in the majority of cases by the conveyancer or solicitor dealing with the sale however it is a little known fact that SDLT and LBTT is a self-assessment tax and purchasers are responsible for the accuracy of their own returns. Where an understatement of SDLT or LBTT results from a mistake and that mistake is careless or deliberate, penalties of up to 100% of the tax understated can apply alongside other sanctions.
The additional charge does not apply to properties with a value of £40,000 or less but this is not an allowance as if the property’s value is in excess of £40,000 then the additional 3% applies to the whole transaction.
The 3% charge is in addition to the stamp duty charged on each tranche of the property price.
We would strongly advise all property purchasers to retain a copy of the SDLT1 or in Scotland the LBTT Return form. These forms are usually completed and submitted by the conveyancing solicitor at the time of purchase as part of the property completion process.