When it comes to claiming an additional stamp duty refund, confusion arises from understanding whether the 3% stamp duty surcharge can be avoided on the basis that you are ‘replacing an only or main residence’. The rules surrounding this legislation can be tricky to understand and there are various conditions that you will need to meet which can vary depending on your personal circumstances.
An individual cannot solely choose their main residence based on how long they spend at each property, there are numerous factors that could legally make one residence your main one.
These factors can include, where most of your possessions are kept, where your long-term intentions lay and how you split your time between residences. These are factors that your local governors will take into consideration when deciding your main residence.
What does ‘Main Residence’ mean?
A “main residence” is considered to be the property where an individual resides for the largest amount of time each year. If they only live at one property, then this will count as their main residence.
You may be wondering, what qualities a residence needs to have in order to fully qualify as a main residence, as mentioned above, it will be where you are based or continue to reside, if this property is the main place you sleep and there is an expectation of continuity with you living there.
However, if the buyer occupies more than one, then the situation becomes more complicated. Personal circumstances have to be considered as it is not always as clear-cut as the property in which someone spends most of their time. The official Government guidance on “main residence” for SDLT purposes outlines a set of questions to consider:
- If the buyer is married or in a civil partnership, where does the family spend the majority of its family time?
- If the individual has children, where do they go to school?
- Which is the residence that the individual is registered to vote on?
- Where is the individual’s working location, as well as how is the residence furnished?
- Which address is used for official correspondence and where is the individual registered for GP and dentist services?
- If the buyer owns a car, at which address is the vehicle registered and insured?
- Which is the main address for council tax purposes?
The previous main residence will be considered as such if it’s the buyer’s main residence at the point of sale, or it was at some time during a period of 3 years before the purchase.
In certain circumstances, such as owning a property abroad or having your main property overseas can make determining the main residency for SDLT purposes more difficult.
For example, if you were to move abroad, and you still owned a property in the UK, then certain factors could shift and change such as what you intend to do with that property and how long you will be gone for.
Other scenarios such as relocating for work purposes might come into play, with some people owning a property where they work, and where they choose to live, when determining your main residence you would have to take into account what type of work you conduct, and how long you will be residing at each property.
Replacement of Only or Main Residence Rules
An individual can avoid the 3% surcharge on additional dwellings on the basis that they are ‘replacing an only or main residence’ with the new property they are purchasing. This basically means that the rates on replacing main residence stamp duty can be mitigated, should you meet the following criteria. If you meet the rules, you could potentially save yourself thousands of pounds on tax. It is important that: 1. The buyer previously owned a home and it was their main residence (they lived there). 2. The previous home has been disposed of at the time of purchase of the new one. 3. The new property is bought with the intent to be the buyer’s main residence (they will be living there).
Purchasing Main Residence Before Selling the Old One
If the buyer still owns their previous main residence at the time of purchase of the new property intended for the main residence, the buyer will have two properties at the time of the purchase and will, therefore, be liable for the SDLT surcharge. However, If the buyer then sells the previous main residence within 3 years, the additional stamp duty refund can be claimed.
Married Couples Purchasing Property
For the purposes of the stamp duty land tax surcharge, couples who are married or in a civil partnership are treated as one person. This means that anything that is owned by one of the partners is considered to be jointly owned. Therefore, the purchase or sale of one of their names is still relevant and could have an effect on whether the SDLT surcharge is due when purchasing a new dwelling. In different circumstances, this will mean that sometimes married couples will have to pay the 3% surcharge when unmarried couples would not. If you are considering an investment in additional property, or you have bought a property that will serve as your only or main residence and think SDLT has been overcharged, CapEx Associates can help with navigating the different legislation and claiming back overpaid tax.
Contact us for more information on how we can help.
Stamp Duty Main Residence FAQs
An annexe is a convenient living space designed for multiple needs, normally they contain a kitchen, toilet, and living space. These types of properties are becoming popular among the elderly as they are designed to fit their needs compared to a traditional house.
While a total stamp duty refund on an annexe may not be possible, you can claim multiple dwellings relief when looking to occupy an annexe, however, certain conditions must be met when claiming MDR (multiple dwellings relief.)
In order to claim Multiple Dwellings Relief the property must have a sleeping area, kitchen, toilet, and access to basic utilities, as well as a main entrance with a lock. The way multiple dwelling relief is calculated is by dividing the total price of the property by the number of dwellings purchased and calculating appliable stamp duty on the average property price.
When purchasing a second home, the stamp duty land tax threshold is lower. If the second residence is worth more than £40,000 then you will have to pay stamp duty on that second property.
You will have to pay an additional percentage on top of the stamp duty you already pay. This surcharge is set at 3% in England, whereas in Scotland & Wales the surcharge is set at 4%.
In terms of properties that exceed the £250,001 threshold, properties that are worth up to £925,000 will mean that you pay an 8% on stamp duty.
Properties between £925,001 and 1.5 million pounds would be 13% on stamp duty, and any property above 1.5 million pounds would make you pay 15% on stamp duty.
It’s also important to mention what exactly qualifies as a second property as not all properties will guarantee you a second home stamp duty exemption. For example; buy to let, holiday homes, and any property purchased as a gift, will all qualify as second homes and will contain the 3 or 4% surcharge on stamp duty.
If you wish to change the main residence of your property, it is important to notify the tax authorities as to why you are doing so, notifying authorities may include sending documentation over to showcase the change. Evidence may also have to be provided to the right authorities to justify why you are switching main residency.
If the spouse who owns no property has their name on the deeds of the owned property, the chances of qualifying for first time buyers relief are zero, however if their name is not included within the deeds of the property, then there could be a possibility.
If you end up transferring property because of separation from your spouse, then if it is under court order you won't have to pay SDLT on any interest you transfer.