Stamp Duty: Replacing your Main Residence

6th April 2018

On the face of it stamp duty land tax (SDLT) can be calculated quite simply. All you need to do is take the purchase price of the property and apply the relevant percentage. For example, if the purchase price on a residential property is £200,000; the first £125,000 attracts no charge, with a 2% levy on the remaining £75,000 resulting in a SDLT payment due of £1,500.

So for the majority of purchasers the calculation is relatively straightforward. However, there are exceptions and as with many other tax regulations it pays to be fully aware of these before you embark on your property purchase. For example, those buying their first home are not subject to SDLT on the first £300,000 with 5% charged on the next £200,000; provided the total cost is not more than £500,000. In that eventuality even though purchasers may be first-time buyers, they follow the normal calculation rules.

One area which can catch purchasers out is in the 3% premium applied to those purchasing second properties. Whatever the underlying reason for the purchase (for example a second home, holiday home or a tenanted property), the 3% premium applies. Borrowing from our first example then, the purchase of a second property costing £200,000 would attract an additional 3% resulting in a total SDLT charge of £7,500.

Those knowingly purchasing a second property may already be aware of the potential costs but what if you are simply moving house; does the additional charge apply in that instance? Well, yes it can do if you buy your new property before you have sold the old one. Perhaps your property sale has been held up in a chain or it may be that you are so enthusiastic about a property which you have seen that you want to complete your purchase before you even put your existing home on the market. Either way, that purchase will count as a second property and attract the additional 3% premium.

However, recognising that the second property legislation was not designed to punish homeowners, the additional premium can be reclaimed if the main residence is sold within three years of purchasing the new home. This reclaim isn’t automatically generated with homeowners being required to submit a claim to HMRC.

Thompson Jenner Partner Paul Carnell commented “there can be a lot of ambiguity over home and secondary residences, particularly in cases where individuals may own a number of properties. We are happy to review and guide people through the SDLT system to ensure that they pay the correct amount of tax and are able to obtain refunds if appropriate.”

On a footnote, it is important to note that with effect from April 2018 Stamp Duty Land Tax is being replaced in Wales with a Land Transaction Tax (LTT). Although this will be broadly similar to SDLT, the bandings and percentages to be charged differ and LTT contains some additional rules in respect of higher rates residential property transactions. In addition the rent element of newly granted residential leases is chargeable under SDLT but exempt under LTT.



If you would like to find out more or meet to discuss the services which we are able to provide, please contact Paul Carnell, one of our other Partners or one of our tax advisers in Exmouth & Exeter on 01392 258553 or 01395 279521 to arrange a free initial meeting.




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