SDLT Thresholds Increase - And A High Bar for ‘Uninhabitable’ Dwellings
The last few years have seen the thresholds for stamp duty land tax (SDLT) for residential properties go up and down. The next change – an increase this time around – takes effect on 1 April 2025. Meanwhile, HMRC has warned about the significant numbers of erroneous applications for repayment of SLDT on the basis a property is uninhabitable.
Imminent SDLT changes
From 1 April 2025, the SDLT rates are increasing as follows:
· First-time buyers: 0% on purchase price of up to £300,000; 5% on the value from £300,001 to £500,000
· Other buyers: 0% up to £125,000; 2% on the value from £125,001 to £250,000 and 5% on the portion from £250,001 to £925,000
In addition, individuals buying second or subsequent residential properties may be caught by an additional 5% (also coming into effect on 1 April) on purchases over £125,000.
Whether or not the additional SDLT will apply depends on the purpose of the purchase. A buyer will not be liable for the additional 5% if the subsequent property is replacing their main residence and the previous main residence was sold within 36 months of completing the new purchase.
Uninhabitable dwellings
Disputes between HMRC and taxpayers as to whether a residential property is habitable are not uncommon. This reflects, in part at least, just how valuable an SDLT exemption is to buyers of derelict property or other properties that are unsuitable for use as a home.
HMRC has recently warned that a very high proportion of SDLT repayment claims received in relation to uninhabitable residential dwellings are wrong. In fact, it will only apply to a small minority of buildings. It also urges customers to be cautious about being misled by repayment agents into making incorrect claims.
We have considered the case of Mudan in which the tax tribunal clarified the proper approach to ‘uninhabitable’ properties in the context of SDLT. The buyers purchased the property and claimed it was unsuitable for use as a single dwelling and contested the SDLT (which was around £100,000). The tax tribunal rejected their claim, saying that a significant degree of disrepair was required for a property to be uninhabitable on the effective date. (The case is now heading to the Court of Appeal.)
As a result of that decision, HMRC has updated its guidance (SDLTM00385) on what is chargeable – and includes a helpful summary of the Upper Tribunal’s findings.
Crucially, the guidance emphasises that if the building has previously been used as a dwelling, it is “fundamentally capable of being so used again (assuming there is no lack of structural or other physical integrity preventing such use)”. It is likely to be considered “suitable for use as a dwelling”, even if not ready for immediate occupation at the time of completion.
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be