Stamp Duty Land Tax (‘SDLT’) Changes

On April 1st 2016 an extra 3% was added to SDLT on the purchase of a second home over a certain value. This 3% is applied to the entire purchase price of the property, and has had huge implications on many people who own more than one Property.
Below are some of the common questions we are asked in relation to the changes:

What does it mean by ‘second home’?

In determining if this is your second home, property held anywhere, and properties where you own a share (as long as the share is worth £40,000+) is taken into consideration. Caravans, houseboats, mobile homes and properties under £40,000.00 are not taken into consideration.

Do I have to pay this tax if I am selling my only Property and then buying another one to live in?

Your ‘main residence’ is the home which you live in. This is a matter of fact and will be determined based on various factors such as where you primarily live, where you are registered to vote and so on. Even if you have multiple properties, if you are replacing your ‘main residence’ you will not be liable for this extra tax.

To replace your main residence however you must also be disposing of (selling or gifting) your previous main residence.

I have brought a new primary residence and waiting for my previous primary residence to sell, do I still have to pay the extra tax?

This could cause issues if due to your circumstances, you need to buy your new main residence before you sell your previous one. However if you sell your previous main residence within 36 months of buying your new main residence, you will be refunded in full by HMRC of the additional tax paid.

Similarly this applies for any property that has been your only and main residence during the 36 months before your purchase. You must apply for this on a repayment request form from the HMRC.

Married couples, civil partners and people who buy with joint ownership are treated as one unit, and as such if either of them owns more than one residential property both may pay the higher rate SDLT when purchasing another. Separated couples are not treated as one entity in this respect.

This will affect large scale investors who will be liable for the additional charge and will affect almost all buy to let purchasers.