HMRC has reminded conveyancers to use code ‘04’ for the ‘type of property’ when completing Stamp Duty Land Tax (SDLT) for buy-to-let and second residential properties
Code 04 must be used when the purchase of a residential property results in owning more than one residential property. Code 01 is for residential properties but does not include additional properties. When code 04 is used the HMRC system will automatically calculate the tax due at the higher rates.
If the new property is a replacement for a main residence but this has not yet been sold, code ‘04’ must still be used but a refund can be claimed when the main residence has been sold.
From the 1 April 2016 the rates for SDLT were higher if you bought an additional residential property for £40,000 or more in England, Wales and Northern Ireland. These include buy-to-let properties and second homes.
The old SDLT rates compared to the new rates are shown below:
Property price £ | SDLT rate % | SDLT surcharge rate % |
Up to 40,000* | 0 | 0 |
40,001-125,000 | 0 | 3 |
125,001 - 250,000 | 2 | 5 |
250,001 - 925,000 | 5 | 8 |
925,001 - 1.5m | 10 | 13 |
1.5m plus | 12 | 15 |
* Purchases below £40,001 will be exempt from the SDLT surcharge and will not have to complete HMRC disclosure form
The higher rates are in support of housing supply and low-cost home ownership, the additional tax collected helps to double the affordable housing budget, which in turn helps first time buyers.
HMRC has updated their guidance page in order to correct this issue.
