Higher Stamp Duty and Residential Properties

As you may be aware, anyone buying a second residential property in England, Wales and Northern Ireland will probably have to pay an enhanced stamp duty rate of 3% above the usual rates.

People may think this only applies if you already own a residential property and then either purchase a buy to let property or a second home.  However, there are different scenarios that fall into the higher rate category that you may not have been aware of.

For example:-

  • Married couples/civil partners who separate, sell the matrimonial home and then individually purchase separate homes would have to pay stamp duty at the higher rate on the second property to complete because they are still classed by the Inland Revenue as one ‘unit’ owning two properties until such time as they have either a Financial Consent Order sealed by the Court, or a formal Separation Deed.
  • If you buy a property with someone else and at the time of completion one of you then owns two or more properties, the second purchase is subject to the higher rate, even if the other purchaser does not own another property.
  • If you purchase a second residential property and rent out your first residential property, you will still have to pay the higher rate of stamp duty on your purchase.
  • Purchasing a property in the name of a company is also subject to the higher rates, even if the property will be the only residential property owned by the company, if any Director of the company owns another residential property.
  • A property owned outside England, Wales and Northern Ireland is still taken into account if you then buy a further residential property in England, Wales or Northern Ireland, even though the first residential property is in a different country.

There are many different scenarios that will mean higher rates apply if at the end of the day you own more than one residential property at the time of completion.  The following link will provide further information : https://www.gov.uk/government/consultations/consultation-on-higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties/higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties

In certain circumstances higher stamp duty can be reclaimed (as in the difference between the lower rate and the extra 3% rate) if within a three year period of purchasing the additional property you sell your previous home then a request can be forwarded to the Inland Revenue to see if you are eligible for a refund.

 

If you are at all in doubt about whether the higher rates apply to your transaction, then you should check the Government website referred to above or seek tax advice from your Accountant or Financial Advisor.

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