Second Home Stamp Duty

jamesonhurst

Hi,

I'm sure this has been asked before but I'm struggling to find an answer anywhere online so could do with some advice/clarification.

I currently own a flat in London with a friend of mine which we bought 7 years ago and lived in for 5 of those. 2 years ago, he moved out and bought a place with his other half and I did the same. We kept the flat and now have it as a rental property. We're looking to hang onto this long term.

At the point of buying our other properties with our respective other halves, we both had to pay the second home stamp duty increase. This was coming up to 2 years ago.

My fiancee and I now want to move again and here's my question...

I know that if you sell your second property within 3 years, you're entitled to a refund of the second home stamp duty increase but here's where I need some help...

1. If we sell our house and then immediately buy another property, I know that we'd have to pay the extra 3% on the new place but can we also apply for the refund at the same time essentially using the refund to cover the increase on the new property or would we have to pay it twice?

2. If not, does there have to be a time gap in between selling our current property and buying a new place to be eligible for a refund?

3. If no.1 isn't possible would we be better selling our property, renting for a short period and then buying again?

I'm loathed to pay the increase twice as it's a big chunk of cash!

Thanks in advance.

James

SpiderLegs

1. If you are replacing your main residence the surcharge does not apply, so you would not be required to pay this.
2. Three years.

jamesonhurst

Thanks!

So just to clarify...we would be replacing our main residence so does that mean we would just forfeit the 3% increase that we paid when buying our current property and then would only pay the standard rate on the next property or would we need to pay the 3% increase on the new property and apply for a refund on the increase we paid when buying our current house?

G_M

jamesonhurst wrote: »

I'm sure this has been asked before but I'm struggling to find an answer anywhere online so could do with some advice/clarification.

I currently own a flat in London with a friend of mine which we bought 7 years ago and lived in for 5 of those. 2 years ago, he moved out and bought a place with his other half and I did the same. We kept the flat and now have it as a rental property. We're looking to hang onto this long term.
OK. But bear in mind that in due course, if/when you sell, you'll be liable for Capital Gains Tax as t is not your primary residence.

At the point of buying our other properties with our respective other halves, we both had to pay the second home stamp duty increase. This was coming up to 2 years ago.
Correct.

My fiancee and I now want to move again and here's my question...

I know that if you sell your [STRIKE]second property[/STRIKE]primary residence within 3 years, you're entitled to a refund of the second home stamp duty increase but here's where I need some help...

1. If we sell our house and then immediately buy another property, I know that we'd have to pay the extra 3% on the new place
By 'immeditely' do you mean Complete on both sale and purchase on the same day?
If so, no, you would be replacing your primary residence with a new primary residene. No extra 3% to pay.
Similarly, if you sell your primary residence, and then purchase a new primary residence the following day/week/month, there would be no extra 3% to pay.

but can we also apply for the refund at the same time essentially using the refund to cover the increase on the new property or would we have to pay it twice?
Nothing to reclaim.
You cannot reclsm the extra 3% you paid 2 years ago as you are not selling the flat.

2. If not, does there have to be a time gap in between selling our current property and buying a new place to be eligible for a refund?
hmm... not sure. Have to look taht up!

3. If no.1 isn't possible would we be better selling our property, renting for a short period and then buying again?

As you're replacing a primar residence there's no extra SSLT to pay

edit: explained fuller by HMRC here:

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800

jamesonhurst

Great - thanks very much for this. It's super confusing!

So, I guess the only way of reclaiming the 3% increase would be to sell both our primary residence (our current house) and also the rental flat within the 3 year period? Essentially if we hang onto the rental flat long term, we've essentially lost the 3% to the taxman as well as having to consider capital gains going forward...!

Doozergirl

jamesonhurst wrote: »

Great - thanks very much for this. It's super confusing!

So, I guess the only way of reclaiming the 3% increase would be to sell both our primary residence (our current house) and also the rental flat within the 3 year period? Essentially if we hang onto the rental flat long term, we've essentially lost the 3% to the taxman as well as having to consider capital gains going forward...!

No, that 3% has gone, never to be seen again. Because you bought an additional property and the existing one wasn't your primary residence.

G_M

Unless I have misunderstood, your flat has been let out for 2 years. It has not been your primary residence for that period.

If you sell it now, you will not be selling your primary residence so could not reclaim the extra 3%. That bird has flown.

AnotherJoe

Doozergirl wrote: »

No, that 3% has gone, never to be seen again. Because you bought an additional property and the existing one wasn't your primary residence.

According to the OP the flat was their primary residence.

jamesonhurst

Ok that's answered that one then! The flat was my primary residence for 5 years but for the last 2 (and since I purchased a house with my fiancee) it hasn't been.

Think it's all clear now so thanks for all the advice. Irritating that the taxman has that extra cash but hey ho! I'm all for the government charging the extra stamp duty but maybe not on those that are in the fortunate position of being able to have one other property which can act as a retirement fund. I also pay tax on the income that comes through that so they're still getting their taste!

AnotherJoe

If the flat was your primary residence when you were buying your current house and you sell it within the next year (eg within the 3 year limit) my understanding is you'd be eligible for a refund.
Where you could not claim a refund and where I am pretty sure GM is wrong, is if you sell your current residence and do not replace it.

jamesonhurst

AnotherJoe wrote: »

If the flat was your primary residence when you were buying your current house and you sell it within the next year (eg within the 3 year limit) my understanding is you'd be eligible for a refund.
Where you could not claim a refund and where I am pretty sure GM is wrong, is if you sell your current residence and do not replace it.

Sorry not sure I understand. So if we sell our current house within the next year and buy another one (whilst keeping the flat), then we could claim a refund?