26 November 2018 was a key date when it came to sidestepping the Government's 3% stamp duty land tax. Here are 5 scenarios where completing by then could have saved you SDLT.

UPDATED 27 NOVEMBER, 2018

Rules around the Government’s 3% stamp duty land tax (SDLT) loading on the purchase of additional properties are a minefield at the best of times.

A good place to start is with Zoopla’s 3% stamp duty Q&A where you can also post a question for SDLT expert, John Shallcross

In some cases, however – all of which are based around so-called replacing a main residence rules – things become more complicated still.

Here the date of 26 November 2018 could be crucial.  

If your circumstances reflect any of the following 5 scenarios and you completed by 26 November 2018 but paid the higher rates of SDLT you might be due a refund.

1. You’ve sold a property before 26 November 2015, that you once lived in

A and B sold their home in January 2015 and went to work abroad where they lived in a rental property. They have now returned to England and bought a property for £250,000. They also own a holiday home that’s worth around £100,000. 

  • If they completed the purchase by 26 November 2018 they escaped the surcharge on the £250,000 home and the stamp duty land tax (SDLT) due was £2,500 

  • If they completed after 26 November 2018, the 3% loading applied and the SDLT bill was £10,000  

Why? They once lived in the sold UK home as their only residence, holiday homes are still considered as additional property for 3% stamp duty purposes – and the shares A and B have in the holiday home are worth more than £40,000 each.  

If they bought the £250,000 property after 26 November 2018 it was more than three years after they sold their home. This means they would NOT be able use the sale as that all-important ‘golden ticket’ to exempt them from the surcharge on the basis they had replaced their only or main residence.

But if they completed the purchase of the £250,000 property by 26 November 2018, the three year rules did apply and they escaped the surcharge on the basis that they are replacing their only or main residence.

Modern flat for sale

2. You've sold a property you last lived in before 26 November 2015 

C and D bought Property 1 together in 2002 and lived in it until 2006 when they bought Property 2. But they didn’t sell Property 1 – they rented it out to tenants instead. 

Now, C and D have bought another home – Property 3 – to live in, at a cost of £500,000. But to fund the purchase, they first needed to sell Property 1. This time, they will kept Property 2 which is worth £200,000. 

  • If they completed the purchase by 26 November 2018 they escaped the surcharge on Property 3 and the SDLT due was £15,000

  • If they completed after 26 November 2018 the 3% loading applied to Property 3 and the SDLT was £30,000

Why? C and D once lived in Property 1 as their only residence (the fact they have also lived in Property 2 since is irrelevant).  

But because they last lived in Property 1 more than three years ago, to make use of replacing main residence rules, they needed to complete the purchase of the new property by 26 November 2018.

3. You transferred your share in a property before 26 November 2015 

E and F were married and owned two properties – the home they lived in and one they rented out, but which is in negative equity

When the couple divorced in June 2014, E transferred his half share in the marital home to F. The pair jointly retain the property in negative equity which is worth around £100,000. 

E has lived in rented accommodation since June 2014 but was able to buy his own property to live in for £130,000. 

  • If E completed the purchase of the £130,000 property by 26 November 2018 he escaped the surcharge and the SDLT due was £100

  • If he completed after 26 November 2018 the surcharge applied and the SDLT was £4,000

Why? The property in negative equity, which E still part-owns, will count against him in the new purchase. This is because the rules look at the MARKET VALUE of his share (currently £50,000), NOT his share minus the debt on the property.

His marital home was E’s only residence but the disposal of his share was more than three years ago.

This means that he needed to complete on the new home by 26 November 2018 to fall within the replacement of a main residence exception.

Semi-detached home for sale

4. You transferred your share in a property you last lived in before 26 November 2015 

Brother and sister, G and H bought Property 1 together in 2003 and both lived there. In 2006, G moved out and bought Property 2 to live in but retained his share in Property 1, while H continued to live there. This property is now worth £100,000. 

G bought Property 3 for £150,000, but to fund the purchase, sold his half-share in Property 1 to H. G kept Property 2 and is renting it out. 

  • If G completed the purchase of the £150,000 property by 26 November 2018 he escaped the surcharge and the SDLT due was £500

  • If he completed after 26 November 2018 the surcharge applied and the SDLT was £5,000. 

Why? Although G has lived in Property 2 since living in Property 1, he can still use the fact he disposed of his share in Property 1 to get within the ‘replacement of main residence’ exception for the purchase of Property 3.  

However, because he last lived in Property 1 more than three years ago, he needed to complete this purchase by 26 November 2018.

Need more detail around 26 November 2018 changes? Head to John's article on the Blake Morgan website

5. Before 26 November 2015 your spouse sold a property you used to live in 

J and K are a long-married couple. They lived together in Property 1 (owned solely by J) and sold it in June 2014. The couple then moved into Property 2, which K had inherited many years before. 

J and K bought a property to live in for £1m. But K retains Property 2 which she plans to rent out. 

  • If J and K completed the purchase by 26 November 2018 they escaped the surcharge and the SDLT due was £43,750

  • If they completed after 26 November 2018 the 3% loading applies and the SDLT was £73,750 

Why? HMRC looks at joint buyers separately for the purpose of the stamp duty land tax surcharge – even if they are married.

And while J has no properties counting against him, K has Property 2 counting against her.  

However, K can potentially rely on J’s sale of Property 1 as she used to live there as her main residence – and was J’s spouse at the time of the sale.  

But, again, because the sale was over three years ago, for the replacement exception to apply the purchase needed to complete by 26 November 2018.

Detached family home for sale

What do each of these five scenarios have in common?

  1. There was some kind of sale or transfer which took place before the purchase of a property which the buyer intends to live in

  2. The buyer had transferred or last lived in the previous property before 26 November 2015

  3. The buyer has another property which counts against them

  • Regular SDLT applies to homes costing more than £125,000 and kicks in at a starting rate of 2%.
  • The 3% SDLT loading applies to additional properties costing £40,000 or more.

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THE CONTENTS OF THIS ARTICLE DO NOT CONSTITUTE FINANCIAL OR LEGAL ADVICE. IT IS ASSUMED THAT PROPERTIES ARE IN ENGLAND UNLESS STATED OTHERWISE. ADVICE SHOULD BE SOUGHT BEFORE PROCEEDING WITH ANY TRANSACTION. THE SAME APPLIES TO THE COMMENTS SECTION, BELOW.

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