Buying house - how does stamp duty work exactly with 2 buyers, one with second home

Mega_Maniac

So hopefully a simple question, but can't find an answer online, for simplicity lets assume there is no stamp duty holiday:
If me and my partner are both buying a house worth 500k then the 'normal' stamp duty on this would be £15k
However, I have a second home. I plan to sell it but it needs renovations before this is possible. I know any stamp duty paid will be refundable within 3 years following sale. However, how much is the initial payment of stamp duty.
Is the additional second home premium of 3% payable on the full purchase price of £500k or is it only payable on my 'share' of the property - so assuming 50% - £250k?

[Deleted User]

Mega_Maniac said:

So hopefully a simple question, but can't find an answer online, for simplicity lets assume there is no stamp duty holiday:
If me and my partner are both buying a house worth 500k then the 'normal' stamp duty on this would be £15k
However, I have a second home. I plan to sell it but it needs renovations before this is possible. I know any stamp duty paid will be refundable within 3 years following sale. However, how much is the initial payment of stamp duty.
Is the additional second home premium of 3% payable on the full purchase price of £500k or is it only payable on my 'share' of the property - so assuming 50% - £250k?

The higher rate will apply to the full purchase price if this second home you already own is worth £40k or more. 

The second home you plan to sell is that your current main residence or has it been your main residence at some point in the last 3 years? 

stig

As Lover-of-Lycra says, If any of the buyers meet the condition for the transaction to attract the higher rate of stamp duty, the whole consideration is liable.  

If you can retrospectively meet the condition that the property is a replacement main residence, the whole of the surcharge can be refunded - but that depends on you both selling your other property within 3 years AND on you having lived in it as your main residence at some time in the 3 years before you bought the new property

and joint purchasers are jointly and severally liable for the whole of the stamp duty, in law there aren’t any “shares”

Stig

AnotherJoe

Mega_Maniac said:

So hopefully a simple question, but can't find an answer online, for simplicity lets assume there is no stamp duty holiday:
If me and my partner are both buying a house worth 500k then the 'normal' stamp duty on this would be £15k
However, I have a second home. I plan to sell it but it needs renovations before this is possible. I know any stamp duty paid will be refundable within 3 years following sale. However, how much is the initial payment of stamp duty.
Is the additional second home premium of 3% payable on the full purchase price of £500k or is it only payable on my 'share' of the property - so assuming 50% - £250k?

As you've described, which it sounds as though you are not living there, then no, the extra 3% would NOT be refundable.

SDLT_Geek

Good point @AnotherJoe. It depends on what OP means by having a “second home”.  It could be:
(a). A property which OP has never lived in as a main residence, but only ever as a second home.
(b). A previous home of OP which OP lived in as an only or main residence, but which is not now where OP lives.

If the position is (a) then the 3% extra would not be recoverable when the second home is sold.

It it is (b) then, provided the three year conditions are met, the 3% should be recoverable.

Mega_Maniac

Hi thanks for your replies,
My 'second home' is my main residence, both me and my partner had properties when we got together, she is able to sell immediately, I on the other hand am not. So I think I am entitled to that refund.

Are the answers above the same if I am a tenant in common? Rather than joint tenants? If my understanding is correct then joint tenants essentially both 'own' 100% of the property together as a party. But tenants in common do not, they own a designated share.

I have also read that if you 'buy in' to a property afterwards, so let say for example my partner bought the house with her own money and mortgage, then I 'bought in' later that you have to pay stamp duty again on any transfer of ownership over the threshold. So my question is then - is there some time limit between how often you can do this? What would be stopping someone from just transferring 125k several times over. This may be a realistic scenario for us as my partner will 'own' more of the property as she is putting down a large amount of equity, and I will plan to buy her out (up to 50%) over time. 

the other thing I don't quite understand about all this is the sums involved. Lets say I wanted to keep my second house and that there was no stamp duty holiday:
Scenario 1:
On a sale of 675,000, stamp duty on the full amount inc the second home fee is £44k
Scenario 2:
If my partner buys at 675,000 she pays £23,750
If I then hypothetically buy in after the fact, keeping my second home with a 50% transfer of deed, I pay a further £17k
So the total is £40,750. Maybe not worth the hassle with fees involved in actually doing this, but it just strikes me as strange that this is possible, as if the sums were higher the difference must also be so?

AdrianC

So...

You (singular) currently own A, and live in it.
Your partner currently owns B, and lives in it.
You (plural) are jointly buying C. Your partner is selling B, you (singular) are not selling A.

You (plural) are paying +3%, absolutely, on the entire purchase price. You (singular) are going from one property to two.

IF A is sold within three years of the purchase of C, then the +3% can be reclaimed.

A tax-evasion scheme such as you suggest will be seen right through by HMRC.

SDLT_Geek

Mega_Maniac said:

Hi thanks for your replies,
My 'second home' is my main residence, both me and my partner had properties when we got together, she is able to sell immediately, I on the other hand am not. So I think I am entitled to that refund.
OP and partner as joint buyers will be entitled to a refund of the extra 3% SDLT when OP sells OP's previous home (assuming the 3 year rules are met).
Are the answers above the same if I am a tenant in common? Rather than joint tenants? If my understanding is correct then joint tenants essentially both 'own' 100% of the property together as a party. But tenants in common do not, they own a designated share.
This refers to how the new house is bought by OP and partner?  If so, then the SDLT analysis is the same for buyers, whether they are joint tenants or tenants in common.
I have also read that if you 'buy in' to a property afterwards, so let say for example my partner bought the house with her own money and mortgage, then I 'bought in' later that you have to pay stamp duty again on any transfer of ownership over the threshold. So my question is then - is there some time limit between how often you can do this? What would be stopping someone from just transferring 125k several times over. This may be a realistic scenario for us as my partner will 'own' more of the property as she is putting down a large amount of equity, and I will plan to buy her out (up to 50%) over time. 
The rules as to linked transactions are intended to prevent tax savings by this mechanism.  See Finance Act 2003 section 108.
the other thing I don't quite understand about all this is the sums involved. Lets say I wanted to keep my second house and that there was no stamp duty holiday:
Scenario 1:
On a sale of 675,000, stamp duty on the full amount inc the second home fee is £44k
Scenario 2:
If my partner buys at 675,000 she pays £23,750
If I then hypothetically buy in after the fact, keeping my second home with a 50% transfer of deed, I pay a further £17k
So the total is £40,750. Maybe not worth the hassle with fees involved in actually doing this, but it just strikes me as strange that this is possible, as if the sums were higher the difference must also be so?

This saving look possible in theory, but is rarely seen in practice.  There are limits, particularly if what is done is artificial or contrived.

mat1964

Mega_Maniac said:

Hi thanks for your replies,
What would be stopping someone from just transferring 125k several times over. This may be a realistic scenario for us as my partner will 'own' more of the property as she is putting down a large amount of equity, and I will plan to buy her out (up to 50%) over time. 

The rules stop you doing this.  If the buyer and seller are the same then the transactions are linked and you will end up paying the full stamp duty in the end even the transfer is in £125k instalments.  This is explained with examples on the Gov SDLT website.  There is no work around.  

Also, I think if you buy in later - and you still have your 2nd home, then then 3% would still be payable on top of the SDLT for the amount you are buying in.

Mega_Maniac

Ok, thanks all. Genuinely not trying to 'avoid' tax, just trying to work out how it all works.
Can I just clarify one point:

If we purchase together as Tenants in Common, with her owning 75% and me 25%, if I then purchase her out of the 25% difference over 20 or so years, will there be additional stamp duty to pay as I do this? Even though we already paid it on the full purchase price.

Mega_Maniac

It seems like the answer to my above question is 'no' as there is no stamp duty to pay on the transfer of a share of a property that is not mortgaged.