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Stamp Duty Changes


The higher rate of stamp duty for second homes and buy to let properties has now taken effect. Having recovered from the rush of clients requiring completions prior to the 31st of March, Conveyancers are now busy applying the new rules to transactions and, as always, the changes are not as simple to apply as first anticipated. 

It was originally thought that if a purchase resulted in the ownership of more than one property the higher rate of stamp duty would always be payable. However this is not necessarily the case as the definition of ‘main residence’ is key to ascertaining whether the higher rate is payable or not.

 Existing property owners

 If, as an existing owner of a ‘main residence’, you purchase a second property, then the higher rate of stamp duty will apply regardless of whether the subsequent purchase is classed as ‘buy to let’ or not.

 If you retain your main residence and purchase another property which you intend to replace as the main residence then the higher rate of stamp duty will still apply. However, you can apply for a stamp duty refund if you then sell the original property within 36 months of purchasing the replacement.

 Purchasing or replacing your main residence

 If you already own a property which is classed as ‘buy to let’ and then purchase a further property to be occupied as your main residence, the higher rate of stamp duty should not apply  provided you can prove that you are purchasing the subsequent property as your main residence. 

 Any person who owns a buy to let property and sells their main residence has up to 36 months to replace the main residence before the higher rate of stamp duty comes into effect.

 As more transactions are carried out the definition of ‘main residence’ will no doubt be fine tuned but, in the interim, HMRC may ask for evidence of the following:

   1.    That the property is where the owner or their family spends their time.

   2.    Details of the schools attended by any children.

   3.    The owners voting address.

   4.    Where the property owner works.

Other factors which may also be taken into account include the level to which the property is furnished and the correspondence addresses provided to third parties.

In conclusion, if on the date you complete your purchase it results in you owning two or more properties you should consider carefully whether the higher rate of stamp duty is applicable, as this is not always the case.

Anju Newcombe

Disclaimer: This article is not intended to constitute legal advice.  For legal advice in connection with the above, please contact us directly.

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