Stamp Duty when owning a property you currently let

user654321

5 years ago I bought a flat where I lived until last year when I moved into a rental while we finished renovations. We have now decided to buy a house and have tenants in our flat. Will we pay the stamp duty as if we were buying a second home, or will this be considered our principal residence and therefore exempt of the higher rate? When I try the Stamp Duty Calculator, I'm not sure how I should answer the question "Is the property being purchased replacing your main residence? If your previous main residence has not yet been sold choose "No". A refund may be available if the previous main residence is sold within 3 years." Since I currently let my main residence, does that automatically mean that I don't have a main residence? Or should I do something to make it legal before we buy our main residence? Thanks!

davidmcn

You're not selling your main residence, so that exemption is irrelevant to you. You're buying an additional property and the surcharge will apply.

AdrianC

user654321 said:

Since I currently let my main residence, does that automatically mean that I don't have a main residence?

Your main residence is where you LIVE...
It's the place you rent. You can't sell that, because you don't own it.

Right now...
You own A.
Your residence is B, which you do not own, so aren't selling.
You are buying C, and keeping A. You will go from owning one property to two, so you pay +3%.

If you sell A, then it can be counted towards the refund, because you lived in it in the recent past.

user654321

Thanks both, I can see what you mean. However it doesn't seem fair to me because if I had bought that flat to let it 5 years ago, I would be exactly in the same position I'm in now (I would own A, but live in B and would be buying C while keeping A). Sounds like it's favouring people who buy to let from the start rather than others who have to let their flat for a while. 

AdrianC

If you'd let that flat all along, and not lived there until recently, you wouldn't have the option of selling it and getting the +3% refunded.

The "sell main residence" exclusion is so that people who own a let property as well as their home don't get penalised when moving house - they aren't increasing the number of properties they own.
The issue for you is that you don't own your home - you ARE increasing the number of properties you own.

As for "fair", since when did anybody ever promise life was that? End of the day, it's nearly five years since this rule was brought in, and it hasn't had any major changes since.
You knew (or should have) this rule was in place when you made the conscious decision to start your residential letting business...

[Deleted User]

user654321 said:

Thanks both, I can see what you mean. However it doesn't seem fair to me because if I had bought that flat to let it 5 years ago, I would be exactly in the same position I'm in now (I would own A, but live in B and would be buying C while keeping A). Sounds like it's favouring people who buy to let from the start rather than others who have to let their flat for a while. 

What’s not fair? It’s not favouring people who buy to let from the start. You didn’t have to let the property out at all. You could have sold it, you’re choosing to let it instead and so you will face the higher rate of SDLT for the purchase of residential properties because you’re buying an additional residential property. 2>1. 

What you can do, that someone who purchased the property 5 years ago to start letting from the outset, is sell the rental property in the next two years to reclaim the higher rate of SDLT. 

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09730

SpiderLegs

user654321 said:

Thanks both, I can see what you mean. However it doesn't seem fair to me because if I had bought that flat to let it 5 years ago, I would be exactly in the same position I'm in now (I would own A, but live in B and would be buying C while keeping A). Sounds like it's favouring people who buy to let from the start rather than others who have to let their flat for a while. 

What you do with your properties is irrelevant.
the charge is related to the purchase of an additional property.
which is what you are doing.

davidmcn

user654321 said:

However it doesn't seem fair to me because if I had bought that flat to let it 5 years ago, I would be exactly in the same position I'm in now

Not sure why you think you shouldn't be - the purpose of the policy is to deter people from increasing the number of properties they own, which is what you're proposing to do. Anyway, whether or not it's "fair" isn't really the point - rules is rules.

greatcrested

Whether your currently owned property is or is not your main residence, or is/is not let out, is irrelevant.

You are not selling it.

You are increasing your property ownership from 1 property to 2.

You pay the additional SDLT.