Stamp duty land tax is not charged when buying a first home. However, if you’re buying another home that isn’t your permanent residence, you will be liable to pay extra SDLT. The 3% surcharge is added when purchasing an additional dwelling but exemptions apply if the property being purchased is your main residence. The confusion arises from understanding whether the 3% SDLT surcharge can be avoided on the basis that you are ‘replacing an only or main residence’. The rules surrounding this legislation can be tricky to understand and the various conditions you will need to meet vary depending on your personal circumstances.

What is the Definition of “Main Residence”?

A “main residence” is considered to be the property where an individual resides for the largest amount of time each year. If they only live at one property, then this will count as their main residence. However, if the buyer occupies more than one, then the situation becomes more complicated. Personal circumstances have to be considered as it is not always as clear cut as the property in which someone spends most of their time. The official Government guidance on “main residence” for SDLT purposes outlines a set of questions to consider
  • If the buyer is married or in a civil partnership, where does the family spend the majority of its family time?
  • If the individual has children, where do they go to school?
  • Which is the residence that the individual is registered to vote on?
  • Where is the individual’s working location, as well as how is the residence furnished?
  • Which address is used for official correspondence and where is the individual registered for GP and dentist services?
  • If the buyer owns a car, at which address is the vehicle registered and insured?
  • Which is the main address for council tax purposes?
The previous main residence will be considered as such if it’s the buyer’s main residence at the point of sale, or it was at some time during a period of 3 years before the purchase.

Replacement of Only or Main Residence Rules

An individual can avoid the 3% surcharge on additional dwellings on the basis that they are ‘replacing an only or main residence’ with the new property they are purchasing. This basically means that the rates on replacing main residence stamp duty can be mitigated, should you meet the following criteria. If you meet the rules, you could potentially save yourself thousands of pounds on tax. It is important that: 1. The buyer previously owned a home and it was their main residence (they lived there). 2. The previous home has been disposed of at the time of purchase of the new one. 3. The new property is bought with the intent to be the buyer’s main residence (they will be living there).

Purchasing Main Residence Before Selling the Old One

If the buyer still owns their previous main residence at the time of purchase of the new property intended for the main residence, the buyer will have two properties at the time of the purchase and will, therefore, be liable for the SDLT surcharge. However, If the buyer then sells the previous main residence within 3 years, the stamp duty land tax surcharge can be reclaimed.

Married Couples Purchasing Property

For the purposes of the stamp duty land tax surcharge, couples who are married or in a civil partnership are treated as one person. This means that anything that is owned by one of the partners is considered to be jointly owned. Therefore, purchase or sale on one of their names is still relevant and could have an effect on whether the SDLT surcharge is due when purchasing a new dwelling. In different circumstances, this will mean that sometimes married couples will have to pay the 3% surcharge when unmarried couples would not. If you are considering an investment in additional property, or you have bought a property which will serve as your only or main residence and think SDLT has been overcharged, CapEx Associates can help with navigating the different legislation and claiming back overpaid tax. Contact us for more information on how we can help.

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