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‘Will I have to pay the new higher rate of stamp duty?’

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Dear, I have recently got married and want to buy a house with my husband. I own a flat, which I want to keep for investment purposes. My husband doesn’t own any property. Will we have to pay the 3% stamp duty land tax (SDLT) surcharge on our new house? Rosa, Kent

From 1 April 2016, the government will add three percentage points to the existing Stamp Duty rates for those buying a second property. This will make a significant difference to the amount of Stamp Duty that is payable by second homeowners and buy-to-let landlords.

For example, additional homeowners who buy a property for £150,000 before 1 April will pay £500 in Stamp Duty, but this will rise to £5,000 after the deadline – a tenfold increase.

In terms of whether our reader will have to pay the higher rate of stamp duty, that comes down to a number of factors.

Adrian Benosiglio a tax partner at RSM replies:

The new surcharge or ‘higher rates’ of SDLT apply to certain residential purchases completed on or after 1 April 2016 where the amount paid for the property is at least £40,000. Exemptions apply where, for example, the contact was entered into before 26 November 2015 and not amended after that date.

The higher rates are 3% above the standard rates of SDLT. Each rate will apply to the portion of the consideration that falls within each rate band:

Purchase price of property Rate paid on portion of price within

each band

Up to £125,000 3%
Over £125,000 and up to £250,000 5%
Over £250,000 and up to £925,000 8%
Over £925,000 and up to £1,500,000 13%
Over £1,500,000 15%

For example, the SDLT due at the higher rates on a property worth £300,000 would be calculated as follows:

Charge SDLT due
3% on the first £125,000 = £3,750
5% on the next £125,000 = £6,250
8% on the final £50,000 = £4,000
Total SDLT due = £14,000

The same property taxed under the normal rates would suffer SDLT of £5,000.

The main test to consider in determining whether the higher rates apply is whether, at the end of the day on which the new property is purchased, the purchaser (or any of the purchasers, for joint acquisitions) owns a residential property other than the one being purchased. If so, the higher rates will apply unless the person with the other property is making the new purchase as a replacement for his or her only or main residence.

On the face of it, it would appear that the higher rates will apply to you because you intend to retain your flat (assuming it is worth £40,000 or more when you buy the house). However, if the flat has been, or will be, your only or main residence at any time before you buy the new house and you sell the flat before the new purchase, then the higher rates will not apply.

If your husband bought the new house in his name only, this would not avoid the higher SDLT rates. This is because you would be deemed to have purchased the house with him for this purpose. If you were not married and he made the purchase by himself, or if he had made that purchase before you were married, the higher rates would not apply.

If you had previously used the flat as your only or main residence at any time before you buy the house and you sell the flat at any time up to three years after the house purchase, you will be able to claim back the difference between the SDLT payable under the normal and higher rates. The claim could be made up to the later of 13 months after the acquisition of the new property, or three months after the disposal of the old one.

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