Autumn Budget 2017: Anomalies in the Higher Rates (3% surcharge) legislation of SDLT removed

Prior to 22 November 2017, the higher rates of SDLT (the 3% surcharge on the normal residential rate of SDLT for additional dwellings) applied in some unexpected situations including extending a lease, re-mortgaging your home where a spouse is added to the title, purchasing a property following a divorce and purchases of a residential property for children whose affairs are subject to the Court of Protection.  In addition, in certain circumstances, the 3% surcharge did not apply where an element of an existing residential property had been transferred to a spouse or civil partner.

The changes announced in the Autumn Budget will amend the higher rates legislation so that the 3% surcharge should not apply where:

  • Individuals purchase an additional interest in their main residence or extend a lease on their main residence.
  • Interests in residential properties are transferred between spouses (for example as a result of re-mortgaging).
  • An individual purchases a new dwelling following a divorce, where property interests are retained by a former spouse or former civil partner in accordance with property adjustment orders relating to the dissolution of the marriage or partnership.
  • Trustees purchase a residential property for children whose affairs are subject to the Court of Protection.

The changes announced also prevent further abuse of the replacement of the main residence relief by requiring that the purchaser disposes of all of their former main residence to someone other than their spouse or civil partner.

All of these amendments are applicable for transactions with an effective date from 22 November 2017.

All of these changes correct unintended anomalies caused by the hastily enacted Higher Rates legislation of the Finance Act 2016. The measures are welcomed and will particularly benefit individuals looking to buy a new home after a divorce, couples looking to re-mortgage their main residence as well as Trustees and children whose affairs are subject to the Court of Protection.