Stamp DutySDLT supplement and replacing the main residence

Higher rates of stamp duty land tax (SDLT) are payable on the purchase of an additional residential property. However, it is possible to have more than one property and move house without paying the supplement.

It should be noted that SDLT applies in England and Northern Ireland; Land and Buildings Transaction Tax (LBTT) applies in Scotland and Land Transaction Tax (LTT) in Wales. This article focuses only on SDLT.

The supplement

The SDLT supplement increases the normal residential rates by 3% where the purchase price of the additional property is £40,000 or more.

Scenario 1: sell main residence and buy a new one

As far as replacing the main residence is concerned, the simplest case is where the old home is sold, and a new home is purchased, with the sale and purchase completing either at the same time or where the sale completes before the purchase. If the purchaser has no other properties, at any given time the purchaser only owns one property. Consequently, the supplemented SDLT rates do not apply to the purchase of the new main residence; SDLT is payable at the normal residential rates.

Scenario 2: replace main residence but have other properties

A person who owns other properties in addition to their main residence will have more than one property when the main residence is replaced. At first sight, it would seem that the SDLT supplement would be payable on the purchase of the new main residence; however the higher rates do not apply where the dwelling which is being purchased is replacing the main residence. The sale of the old main residence must complete before or at the same time as the purchase of the new main residence (but see also scenario 3 below).

Example

Louise owns a buy-to-let property in addition to her main home. She sells her main home and buys a new house. The sale and purchase complete on the same day. Louise has replaced her main residence and SDLT is payable at the normal residential rates; the supplement does not apply.

Scenario 3: buy a new main residence then sell former main residence

When a person moves home, the sale of the old home and the purchase of the new home may not complete at the same time. If the purchase of the new home completes before the sale of the old home, at the time that the purchase completes, the buyer will have acquired an additional residential property – he or she will, at that point, own both the former home and the new home. As a result, the SDLT supplement will initially apply to the purchase of the new home.

However, provided that the former main residence is disposed of within the three-year period of the purchase of the new property, the supplement paid on the purchase of the new main residence can be reclaimed. But be warned, the window for claiming the repayment is short – claims must be made within 3 months of the date of the sale of the former home or, if later, 12 months from the filing deadline for the SDLT return on the purchase of the replacement main residence. A claim form is available on the Gov.uk website.

Gold Stag Accounts Bishops StortfordExample

George purchases a new home on 23 June 2017. The property needs a lot of work, so he lives in his former main residence while undertaking the work, selling his old home on 3 February 2018. Although the higher rate of SDLT is initially payable on the purchase of the new home, the supplement element can be reclaimed once the former home is sold as this takes place within the required three-year window.

 

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