Higher Rates of Stamp Duty to be Applicable to Lease Extensions

On the 1st April 2016 the Government introduced higher rates of Stamp Duty Land Tax to be levied on purchases of additional residential properties. This effectively means that unless you are buying your first property, or you are selling your main residence and buying a property that is intended to be your main residence, the following extra stamp duty would be levied:-

Band Existing residential SDLT rates New additional property SDLT rates
£0* – £125k 0% 3%
£125k – £250k 2% 5%
£250k – £925k 5% 8%
£925k – £1.5m 10% 13%
£1.5m + 12% 15%

 

*Transactions under £40,000 will not attract stamp duty.

We have now received confirmation from HMRC that the additional rates of stamp duty will also be applicable to the premium payable for lease extensions. Therefore, if you are extending a lease on a property which is not your only property or is not your main residence then it will attract the higher rates of stamp duty if the agreed premium is £40,000 or over.

In addition, if the entity extending the lease is a company then the additional rates of stamp duty will apply to all lease extensions that are settled for a premium of £40,000 or over.

There is one significant exception, which is that if your initial Section 42 Notice has been served to commence a statutory lease extension before 26th November 2015 then the higher rates of stamp duty will not be applicable regardless of when the lease extension actually completes. Therefore, if your initial Section 42 Notice was served before 26th November 2015 your lease extension on your additional property will not attract a stamp duty liability unless the premium is over £125,000.

If you would like advice on extending your lease, on a no obligation basis, please feel free to contact Jade Wilson (direct dial 020 7802 4812 or by e-mail on jwilson@ashleywilson.co.uk) and if you would like to speak to someone regarding any other property legal issues please call reception on 020 7802 4802 and they will be able to pass you to a solicitor who can assist.

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