Legal Q&A: I own my home and a buy-to-let property. I am selling my home and buying a new one. Does the 3 per cent extra Stamp Duty apply to me?

by

Will Philip Hammond row back on Stamp Duty reform for buy-to-let properties in next month's budget? (Source: Getty)

The introduction of the extra charge of 3 per cent to the existing Stamp Duty Land Tax rates on 1 April 2016 has caused a lot of confusion.

To answer your question, even though you own an additional property at the same time as you are buying and selling your main residence, you will not be liable to pay the additional Stamp Duty. The key is that you are buying a property to replace your main residence.

For a long time, there was a common misunderstanding that owning another property when buying another property would trigger the payment, which is not always the case.

Read more: What can you do legally about noisy neighbours?

Following on, if you own a share in another property anywhere in the world worth £40,000 or more, the 3 per cent surcharge will apply. This has come as a great surprise to many overseas buyers.

If there is a delay selling your main residence before you acquire the new one, then provided you sell the main residence within 36 months of completing the new one, you can apply to the HM Revenue and Customs for a refund.

You can make a postal or an online application; it is fairly straightforward. On the flip side, if you sell your home and there is a delay buying the new one and you complete the purchase before 26 November 2018, you can rely on the sale of your home (or the sale of a main residence made many years ago) to avoid paying the additional 3 per cent. After, 26 November 2018, you have 36 months to buy your main residence, which will not be subject to the 3 per cent surcharge.

If the home you’re acquiring is mixed-use (and a careful analysis is required to establish any non-residential aspects), the top rate of Stamp Duty is 5 per cent compared to 12-15 per cent. For example, many country homes have agricultural land or agricultural occupancies in place.

Read more: What does owning a share of freehold mean?

There’s a common misconception that acquiring a property via a limited company does not avoid the extra Stamp Duty. In fact, Stamp Duty is charged at a flat rate of 15 per cent for properties costing more than £500,000 subject to some exemptions.

Lastly, the Government has recently suggested there could be Stamp Duty incentives for home owners who renovate their properties in an energy efficient way. At present, it is only a potential incentive to encourage energy efficient home improvements.

Bircham Dyson Bell is a multi-disciplinary UK law firm advising private companies, public sector bodies, not-for-profit organisations and individuals since 1834. Visit bdb-law.co.uk to find out more