What is the Definition of Main Residence for Stamp Duty Land Tax
Stamp duty land tax is not charged when buying a first home, however, if you're buying another home which won’t be your permanent residence or you don’t plan to live in it, you will be liable to pay extra SDLT. The 3% surcharge is added when purchasing an additional dwelling but you might be exempt from paying it if the property you’re buying 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 and the various conditions to be met will depend on your personal circumstances.
What is the Definition of “Main Residence”?
A “main residence” is considered to be the property where the individual resides. If they only live at one property, then this will count as their main residence. However, if the buyer occupies more than one property, then the situation will complicate, with personal circumstances having to be considered, as it is not always simply the residence where the individual is spending 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. If you meet the rules, you could potentially save yourself thousands of pounds spent 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.