In last year’s Autumn statement, the government unveiled its plans to increase the rates of stamp duty land tax (SDLT) charged on purchases of “additional residential properties” e.g. second homes or buy to let properties. These changes came into effect on 1 April 2016, and apply to completions taking place on or after this date.

In this article we consider both the substance of the new rules and their application to inherited property and trust property.


As you will be aware, SDLT is paid on the purchase of an interest in land. The SDLT payable is determined by reference to the purchase price of the house according to a banding system (similar to income tax) with SDLT being calculated on the portion of the property value which falls within each band.

The New Rates

From 1 April 2016, where an individual has a “major interest in a dwelling” (i.e. they already own residential property) and they then purchase additional property, the rate of SDLT charged on the new purchase will be 3 percentage points above the existing residential rates. These higher SDLT rates are illustrated in the table below.


Existing Residential SDLT Rates

New Additional SDLT Rates

£0 – £125,000



(except for properties where the purchase price is under £40,000)

£125,001 – £250,000



£250,001 – £925,000



£925,001 – £1,500,000



£1,500,001 +



So, for example, the SDLT due on a second home purchased for £250,000 would be £10,000 (3% on the first £125,000 and 5% on the next £125,000).

Some important points to note:

  • Transactions under £40,000 do not require a tax return to be filed with HMRC and are not subject to the higher rates.
  • The higher rates do not apply where the property being purchased is replacing the purchaser’s only or main residence.
  • The rules treat married couples and civil partners as a single entity.
  • The rules apply even if the other property in which you have an interest is situated abroad.
  • The higher rates do not apply to purchases of caravans, mobile homes or houseboats.

Inheriting a Property

SDLT only applies on the purchase of an additional property, and not upon inheriting one. However, the higher rates would come into play in the inverse situation where an individual has inherited a property and later buys an additional property.

Happily, there is an exception (albeit a limited one) which provides that in the three year period following the date of inheritance, if an individual’s beneficial share in the inherited property does not exceed 50%, then he is not treated as having a major interest in the inherited dwelling (a pre-requisite for the higher SDLT rates to apply). The date of inheritance will not be the date of death, but rather the date on which the interest is transferred to the individual.

So, by way of example, assume that three sisters jointly inherit a property worth £300,000 on their mother’s death. One year after the date of inheritance, if one sister was to buy an additional property worth £200,000, the higher SDLT rates would not apply because her 1/3 share in the inherited property is under the 50% threshold and the purchase has occurred within the three year time frame.

As such, this exception gives beneficiaries who inherit an interest in a property of 50% or less three years of breathing space in which to dispose of the inherited property, before the inherited property affects their SDLT position.

Trust Property

The applicability of the higher SDLT rates to beneficiaries of trusts is dependent on the type of trust in which the property is held.

The following beneficiaries are treated as owning a major interest in a dwelling held by the trust, or as the buyer or seller where a trustee buys or sells a major interest in a dwelling:

- The life tenant of a life interest trust (being entitled to occupy the dwelling concerned for life and/or being entitled to income earned in respect of the dwelling).

- The beneficiary of a bare trust.

Beneficiaries with interests in remainder (interests which arise on the death of a life tenant) or interests under a discretionary trust are considered too remote and are not treated as owning the trust property or as the buyer/seller if the trustee conducts such a property transaction.

Finally, it is important to note that all purchases of property by a trustee of a discretionary trust (including the first purchase) are treated in the same way as a purchase by a company i.e. automatically being subject to the higher rates of SDLT. In other words, the discretionary trust itself will bear the higher rates of SDLT, rather than the beneficiaries as is the case for life interest trusts and bare trusts.

This article was written by Clare Jeffries, Partner, Private Client, with assistance from Emily Kearsey, Trainee Solicitor.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.  If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.