Mansion Global

What Do I Need to Know About the U.K. Stamp Duty Land Tax?

A London property investor may be charged up to 15% of purchase price under the tax, but some relief could be available

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Photo by Jim Dyson/Getty Images
Photo by Jim Dyson/Getty Images

Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.

Q: I'm thinking about buying property in London. What do I need to know about the Stamp Duty Land Tax?

The Stamp Duty Land Tax is a levy that buyers must pay when purchasing property in the U.K. At a base level, said Michael Ranson, partner at Macfarlanes LLP in London, the tax applies to any residential purchase that exceeds £125,000, starting at 2% and increasing incrementally up to 12% on purchases of more than £1.5 million.

In addition, he said, the British government imposes a surcharge if the buyer is purchasing a second home—no matter where in the world the purchaser’s primary residence is. Ed Mermelstein, managing partner of the law firm Rheem, Bell & Mermelstein in Manhattan, noted that as of April 1, 2016, the U.K. added an extra 3% to the stamp duty bill of buyers of any home that is not a main residence, including buy-to-let or holiday homes. This means, Mr. Ranson said, an investor spending more than £1.5 million on residential real estate in the U.K. may be charged up to 15% of the purchase price under the Stamp Duty Land Tax.

Some help, however, is available. Mr. Mermelstein noted that buyers can request a refund if they sell their primary home within three years of purchasing a second home in the U.K. And while Stamp Duty Land Tax rules have grown increasingly complex in recent years, relief may be available for certain buyers and certain transactions, Mr. Ranson said. Different tax rules may also apply if the residence is purchased through a corporation or a trust. His bottom line: Consult an attorney.

Email your questions to editors@mansionglobal.com. Check for answers weekly at www.mansionglobal.com.