The 5% Surcharge — Basic Test and Key Reliefs
The SDLT higher rates for additional dwellings (FA 2003 Sch.4ZA) add a 5% surcharge (from 31 October 2024; previously 3%) to every residential SDLT band. The basic test: at the end of completion day, does the purchaser own two or more dwellings? If yes, the surcharge applies. Minor interest exemption: a beneficial interest worth less than £40,000 or less than 50% of the property value can be disregarded — small inherited shares often fall below this threshold. Married couples: either spouse's ownership is aggregated — if your partner owns a BTL and you are purchasing jointly, the surcharge applies. Replacement of main residence: if the old main residence sells on the same day as the new purchase completes (or before), the surcharge does not apply — even if other BTL properties are owned. Three-year window: if the new purchase completes before the old main residence sells, pay the surcharge at completion and reclaim it within 12 months of the old property's sale (provided the old main residence sells within 3 years). BTL purchases do not qualify for the replacement of main residence relief.
Company Purchases, ATED, and Portfolio Planning
Companies: pay standard residential SDLT + 5% surcharge for genuine commercial letting (property rental business exception, FA 2003 Sch.4A para.5 — avoids the 15% flat rate for properties above £500,000). ATED: companies owning residential dwellings above £500,000 must file annual ATED returns; claim the commercial letting exemption annually — failure to claim results in a substantial annual ATED charge. MDR abolished from 1 June 2024 — no more averaging of SDLT rates across multiple dwellings in a single portfolio purchase completing on or after that date. Six or more dwellings in a single transaction: triggers non-residential SDLT rates (FA 2003 s.116(7)) — no 5% surcharge; significant saving for bulk portfolio acquisitions. Mixed-use property: if the property has even a minor commercial element, non-residential rates may apply — no surcharge. Linked transactions: HMRC aggregates consideration from connected purchases from the same seller — structure portfolio acquisitions carefully to avoid unintended aggregation.