In the spring budget of 2016 the government confirmed the details previously outlined for a 3% higher rate of Stamp Duty Land Tax (SDLT) that will apply to anyone buying a property if they already own another property. The main exception to the new rules will be where someone is replacing their main residence. Therefore, if you already own a buy to let property as well as your main home, if you sell your home and buy a new property to use as your main residence then you will not have to pay the higher rate of SDLT. Buyers need to be aware that if they buy the replacement main home before selling their existing property (whether or not they own another property) they will have to pay the additional duty. They will then have three years to sell the existing property and reclaim the extra duty. This applies even if they buy a new house on one day and sell their existing property the following day, potentially causing significant cashflow issues.
The higher rates will also generally apply to purchases (including a first purchase) of residential property by companies. The vast majority of transactions, such as first-time buyers purchasing their first property or home owners moving from one main residence to another will be unaffected.
Property owned globally will be relevant in determining whether a property purchased in England, Wales or Northern Ireland is an additional property. This means that if someone is purchasing their first or only property in England, Wales or Northern Ireland, they may pay the higher rates if they own property outside these areas.
The Government will treat married couples and civil partners living together as one unit. This means that property owned by either partner will be relevant when determining if an additional property is being purchased or not. Therefore, an individual buying a property may be liable for the higher rates if his or her spouse or civil partner has an existing residential property. The government have however confirmed that they will not treat married couples as one unit if they are separated in circumstances that are likely to be permanent.
When buying a property it is important to take advice as to the SDLT implications and if you own, or will own, more than one property you may need to seek the advice of an accountant to ensure that you end up paying the correct amount of SDLT.
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