Returning Expat - Stamp Duty Questions

OldEastEnder

I'm a British expat who has lived in the USA since 2005. Next month I shall be returning to the UK permanently with my wife (a US citizen with a UK spouse visa).

I've been away from the UK for so long that I've forgotten the rules and regs on quite a few things. I've done some searches on this topic including on government websites, but my questions remain unanswered.

What would be the stamp duty position in the following scenario? My wife and I buy a flat (for say £150,000) and live in it for 2-3 years. We then buy a house (for say £450,000) and rent out the flat. Obviously, there would be no stamp duty charged on the purchase of the flat, but would the house be counted as a second home, even though we would be living there full time? If so, would we be able to reclaim the excess stamp duty if we could prove it was our main home? And is there a time limit in which to do this?

Thanks in advance, and apologies if the questions sound basic!

user1977

The second purchase is going to attract the higher rate no matter what you’re using the properties for. You don’t get it back (unless you sold the first property within 3 years).

SDLT_Geek

OldEastEnder said:

I'm a British expat who has lived in the USA since 2005. Next month I shall be returning to the UK permanently with my wife (a US citizen with a UK spouse visa).

I've been away from the UK for so long that I've forgotten the rules and regs on quite a few things. I've done some searches on this topic including on government websites, but my questions remain unanswered.

What would be the stamp duty position in the following scenario? My wife and I buy a flat (for say £150,000) and live in it for 2-3 years. We then buy a house (for say £450,000) and rent out the flat. Obviously, there would be no stamp duty charged on the purchase of the flat, but would the house be counted as a second home, even though we would be living there full time? If so, would we be able to reclaim the excess stamp duty if we could prove it was our main home? And is there a time limit in which to do this?

Thanks in advance, and apologies if the questions sound basic!

Are you buying in England, so the relevant stamp duty is stamp duty land tax?

If so then you need to watch (a) the upcoming change in thresholds for SDLT (b) the 2% surcharge for non UK residents (expected to become a 3% surcharge) and  (c) the 3% surcharge for additional dwellings.

(a)  Assuming you have no property interests anywhere in the world, then your flat purchase should escape the 3% surcharge for additional properties, and on present rates a purchase for not more than £250,000 would escape SDLT.  But the threshold is due to fall back to the usual £125,000 for completions from 1 April 2025.

(b)  If you complete the purchase of the flat before you have clocked up at least 183 days in the UK in the year, then the extra 2% SDLT would be due.  This is likely to be recoverable later if you are in the UK and later clock up the 183 days within a year.  Labour have said the 2% extra is due to become 3%, we are expecting that in the autumn budget.

(c) As @user1977 says, you can expect to pay the extra 3% on the house if you keep the flat.  By then the rules might have changed.  In Scotland the equivalent surcharge is 6%.

OldEastEnder

Thanks for your comprehensive replies. Extremely helpful.
As far as I know, and as far as all the advice I have been given points to, as a returning British citizen I am a UK resident from day one. The 183 day rule does not apply to returning citizens.
Apologies, I should have made it clear that the purchase(s) will be in England.

SDLT_Geek

OldEastEnder said:

Thanks for your comprehensive replies. Extremely helpful.
As far as I know, and as far as all the advice I have been given points to, as a returning British citizen I am a UK resident from day one. The 183 day rule does not apply to returning citizens.
Apologies, I should have made it clear that the purchase(s) will be in England.

What you say above (now in bold) might well be true for other taxes, but SDLT has its own rules, with a 183 day test.  There is an exception for Crown employees, such as members of the armed forces and diplomats. 

There is guidance here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09850