Stamp Duty Question - Main Residence

gail5863

We sold our main residence 3 years ago and have been renting since, while we look for our new main residence (intending to buy at about £650K with stamp duty expectation £22K+ ish).

We have 3 x buy to let properties (small terraced houses) & apparently because we have these, and have not replaced our main residence within 36 months of selling our former main residence, (mainly due to Covid we weren't able to look for 1 year), we now have to pay the extra 3% surcharge (as if this is a second home/additional property). This would effectively double our stamp duty if this is the case (likely to now be £40K +).   

If this is the case, it changes our financial position so we will have to rethink and rather than carry on renting from another landlord, possibly now think about moving into one of our own rental houses. Presumably we can make this our main residence even though its been rented out before.  

We wonder if stamp duty rates may change/decrease in the Spring Statement and whether to wait till then. Any thoughts welcomed.

_Penny_Dreadful

gail5863 said:

We sold our main residence 3 years ago and have been renting since, while we look for our new main residence, (intending to buy at about £650K with stamp duty expectation £22K+ ish).

We have 3 x buy to let properties (small terraced houses) and apparently because we have these, and have not replaced our 'main residence' within 36 months of selling our former 'main residence', (mainly due to Covid we weren't able to look for 1 year!), we now have to pay the extra 3% surcharge (as if this is a second home/additional property). This effectively doubles our stamp duty to £40K plus - Is this correct? 

If so.... what is the best way to proceed?  We'll now have to rethink whether we buy at all, continue renting or perhaps move into one of our own rented properties as our 'main residence'.  If we did find another house to buy after this, would moving into our own rented property count as our 'main residence' for stamp duty purposes and how long would we need to live there?  We have one buy to let that we could move into and sell on in the future as we never intended to keep it forever. Any thoughts or other suggestions as to how we can deal with this? 

We feel it is incredibly unfair that we have been trying to buy a replacement main residence - having had 3 fall through due to problems beyond our control - and now we feel we are being penalised in such a heavy handed and unfair way possibly having to pay double stamp duty. We wonder if stamp duty rates may change in the Spring Statement and whether to wait till then.

That is correct. You’re outside the 3 year period to claim replacement of your main residence to avoid the higher rate of SDLT. 

The fact you’ve put “main residence” in inverted commas suggests that the BTL won’t be your main residence at all. Merely occupying a property will not in itself make it a main residence. There needs to be a permanence and expectation of continuation to the occupation to establish it as a main residence for the purposes of SDLT. 

SDLT_Geek

_Penny_Dreadful said:

gail5863 said:

We sold our main residence 3 years ago and have been renting since, while we look for our new main residence, (intending to buy at about £650K with stamp duty expectation £22K+ ish).

We have 3 x buy to let properties (small terraced houses) and apparently because we have these, and have not replaced our 'main residence' within 36 months of selling our former 'main residence', (mainly due to Covid we weren't able to look for 1 year!), we now have to pay the extra 3% surcharge (as if this is a second home/additional property). This effectively doubles our stamp duty to £40K plus - Is this correct? 

If so.... what is the best way to proceed?  We'll now have to rethink whether we buy at all, continue renting or perhaps move into one of our own rented properties as our 'main residence'.  If we did find another house to buy after this, would moving into our own rented property count as our 'main residence' for stamp duty purposes and how long would we need to live there?  We have one buy to let that we could move into and sell on in the future as we never intended to keep it forever. Any thoughts or other suggestions as to how we can deal with this? 

We feel it is incredibly unfair that we have been trying to buy a replacement main residence - having had 3 fall through due to problems beyond our control - and now we feel we are being penalised in such a heavy handed and unfair way possibly having to pay double stamp duty. We wonder if stamp duty rates may change in the Spring Statement and whether to wait till then.

That is correct. You’re outside the 3 year period to claim replacement of your main residence to avoid the higher rate of SDLT. 

The fact you’ve put “main residence” in inverted commas suggests that the BTL won’t be your main residence at all. Merely occupying a property will not in itself make it a main residence. There needs to be a permanence and expectation of continuation to the occupation to establish it as a main residence for the purposes of SDLT. 

Well put @Penny_Dreadful

gail5863

Thank you for response, main residence in inverted commas doesn't mean anything other than highlighting it as a possibility of what we could do. I'm pretty much fed up with looking for houses now and I could do with a break from it, but we are renting from another landlord as we thought it would be temporary, and now thinking it makes sense for us to live in our own. 

silvercar

I thought the requirement is to be buying your main residence and not increasing the number of properties owned. If I'm right, then you could sell one of the BTLs and buy your new main residence. There isn't a requirement to actually live in the property you are selling. 

I'm sure someone will correct me if I'm wrong. - which I was!

_Penny_Dreadful

silvercar said:

I thought the requirement is to be buying your main residence and not increasing the number of properties owned. If I'm right, then you could sell one of the BTLs and buy your new main residence. There isn't a requirement to actually live in the property you are selling. 

I'm sure someone will correct me if I'm wrong.

That’s not correct. It’s not as simple as at the start of the transaction the OP owns 3 properties and by selling a BTL and a new main residence will still only have 3 properties at the end of the transaction.  That only works when the owner of multiple properties sells their main residence to buy a new main residence to satisfy condition D -general- of paragraph 3(6) schedule 4ZA FA2003. 

To avoid the higher rate of SDLT the OP would have to first sell all 3 BTL and then purchase a new main residence. 

There is condition D -exceptional circumstances - of paragraph 3(7)(b) schedule 4ZA FA2003. I’m not sure if the ‘rona counts as an exceptional enough circumstance though since people were still buying and selling property the whole way through the pandemic. 

silvercar

_Penny_Dreadful said:

silvercar said:

I thought the requirement is to be buying your main residence and not increasing the number of properties owned. If I'm right, then you could sell one of the BTLs and buy your new main residence. There isn't a requirement to actually live in the property you are selling. 

I'm sure someone will correct me if I'm wrong.

That’s not correct. It’s not as simple as at the start of the transaction the OP owns 3 properties and by selling a BTL and a new main residence will still only have 3 properties at the end of the transaction.  That only works when the owner of multiple properties sells their main residence to buy a new main residence to satisfy condition D -general- of paragraph 3(6) schedule 4ZA FA2003. 

To avoid the higher rate of SDLT the OP would have to first sell all 3 BTL and then purchase a new main residence. 

There is condition D -exceptional circumstances - of paragraph 3(7)(b) schedule 4ZA FA2003. I’m not sure if the ‘rona counts as an exceptional enough circumstance though since people were still buying and selling property the whole way through the pandemic. 

So could OP buy a cheap property, live in it as main residence and then decide to sell it and buy a more expensive main residence?

user1977

silvercar said:

_Penny_Dreadful said:

silvercar said:

I thought the requirement is to be buying your main residence and not increasing the number of properties owned. If I'm right, then you could sell one of the BTLs and buy your new main residence. There isn't a requirement to actually live in the property you are selling. 

I'm sure someone will correct me if I'm wrong.

That’s not correct. It’s not as simple as at the start of the transaction the OP owns 3 properties and by selling a BTL and a new main residence will still only have 3 properties at the end of the transaction.  That only works when the owner of multiple properties sells their main residence to buy a new main residence to satisfy condition D -general- of paragraph 3(6) schedule 4ZA FA2003. 

To avoid the higher rate of SDLT the OP would have to first sell all 3 BTL and then purchase a new main residence. 

There is condition D -exceptional circumstances - of paragraph 3(7)(b) schedule 4ZA FA2003. I’m not sure if the ‘rona counts as an exceptional enough circumstance though since people were still buying and selling property the whole way through the pandemic. 

So could OP buy a cheap property, live in it as main residence and then decide to sell it and buy a more expensive main residence?

Yes, again assuming that they genuinely are intending it to be their main residence and not just a temporary tax-saving stepping-stone.

MultiFuelBurner

user1977 said:

silvercar said:

_Penny_Dreadful said:

silvercar said:

I thought the requirement is to be buying your main residence and not increasing the number of properties owned. If I'm right, then you could sell one of the BTLs and buy your new main residence. There isn't a requirement to actually live in the property you are selling. 

I'm sure someone will correct me if I'm wrong.

That’s not correct. It’s not as simple as at the start of the transaction the OP owns 3 properties and by selling a BTL and a new main residence will still only have 3 properties at the end of the transaction.  That only works when the owner of multiple properties sells their main residence to buy a new main residence to satisfy condition D -general- of paragraph 3(6) schedule 4ZA FA2003. 

To avoid the higher rate of SDLT the OP would have to first sell all 3 BTL and then purchase a new main residence. 

There is condition D -exceptional circumstances - of paragraph 3(7)(b) schedule 4ZA FA2003. I’m not sure if the ‘rona counts as an exceptional enough circumstance though since people were still buying and selling property the whole way through the pandemic. 

So could OP buy a cheap property, live in it as main residence and then decide to sell it and buy a more expensive main residence?

Yes, again assuming that they genuinely are intending it to be their main residence and not just a temporary tax-saving stepping-stone.

Who would know? Starting again as they are small purchase then 6-12 months later bigger purchase?

_Penny_Dreadful

silvercar said:

_Penny_Dreadful said:

silvercar said:

I thought the requirement is to be buying your main residence and not increasing the number of properties owned. If I'm right, then you could sell one of the BTLs and buy your new main residence. There isn't a requirement to actually live in the property you are selling. 

I'm sure someone will correct me if I'm wrong.

That’s not correct. It’s not as simple as at the start of the transaction the OP owns 3 properties and by selling a BTL and a new main residence will still only have 3 properties at the end of the transaction.  That only works when the owner of multiple properties sells their main residence to buy a new main residence to satisfy condition D -general- of paragraph 3(6) schedule 4ZA FA2003. 

To avoid the higher rate of SDLT the OP would have to first sell all 3 BTL and then purchase a new main residence. 

There is condition D -exceptional circumstances - of paragraph 3(7)(b) schedule 4ZA FA2003. I’m not sure if the ‘rona counts as an exceptional enough circumstance though since people were still buying and selling property the whole way through the pandemic. 

So could OP buy a cheap property, live in it as main residence and then decide to sell it and buy a more expensive main residence?

That’s not much different from moving into one of the BTL and claiming it’s their main residence for a period before selling it to buy something else.

_Penny_Dreadful

MultiFuelBurner said:

user1977 said:

silvercar said:

_Penny_Dreadful said:

silvercar said:

I thought the requirement is to be buying your main residence and not increasing the number of properties owned. If I'm right, then you could sell one of the BTLs and buy your new main residence. There isn't a requirement to actually live in the property you are selling. 

I'm sure someone will correct me if I'm wrong.

That’s not correct. It’s not as simple as at the start of the transaction the OP owns 3 properties and by selling a BTL and a new main residence will still only have 3 properties at the end of the transaction.  That only works when the owner of multiple properties sells their main residence to buy a new main residence to satisfy condition D -general- of paragraph 3(6) schedule 4ZA FA2003. 

To avoid the higher rate of SDLT the OP would have to first sell all 3 BTL and then purchase a new main residence. 

There is condition D -exceptional circumstances - of paragraph 3(7)(b) schedule 4ZA FA2003. I’m not sure if the ‘rona counts as an exceptional enough circumstance though since people were still buying and selling property the whole way through the pandemic. 

So could OP buy a cheap property, live in it as main residence and then decide to sell it and buy a more expensive main residence?

Yes, again assuming that they genuinely are intending it to be their main residence and not just a temporary tax-saving stepping-stone.

Who would know? Starting again as they are small purchase then 6-12 months later bigger purchase?

It’s a self-assessed tax. I don’t know what, if anything, would trigger Hector to investigate.