Stamp Duty – When will the changes apply? Replacing a main residence


As many investors will know there are Stamp Duty Land Tax changes coming into effect on 1 April 2016. These changes have been bought about as a result of the growing trend in people investing in multiple properties in order to let them out and with a view to utilising the funds from the additional tax to support other affordable housing schemes.


The changes will affect those investors who complete on a purchase of a second (or third…) property on 1st April 2016 and thereafter. But what happens if a person who owns multiple properties wants to sell their main residence and purchase a new property to reside in – will they be affected by these same rules and be subjected to the higher rates for land tax? After all they will own more than one property following completion.


Amidst the uncertainty HMRC have issued initial guidance in relation to the planned changes. The guidance is clear that if you are replacing your main residence and completing after 1st April the new stamp duty will not apply, even if you own more than one property at the end of the transaction. Unlike Capital Gains Tax you cannot elect a property as your main residence and therefore the main residence property is likely to be treated to differently for Stamp Duty purposes. Whether the property is a main residence will be based upon fact and determined based upon several factors including where they spend their time, where they are registered to vote and where any children of the family go to school.


There are of course circumstances in which the sale of the main residence does not take place simultaneously with the purchase of a new home and this too has been addressed within the guidance. The current proposal is to not charge the higher rate tax for those purchasing a new main residence within 18 months of selling previous main residence. In addition where the transactions overlap and the sale has yet to go through but the purchase continues a refund can be requested for any overpaid stamp duty if the sale takes place within 18 months.


What does this mean going forward? It is now clearly important to advise your solicitor of the nature of your purchase and any information that could have an impact on your stamp duty liability. Keeping your solicitor fully advised of the circumstances will in turn ensure the stamp duty liability is correctly calculated. Clearly those wishing to complete on a purchase prior to 1st April so the new rates will not affect them will need to act quickly in instructing a solicitor.

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