Home movers who buy before they sell will be hit with Stamp Duty surcharge

People who buy their next home before selling their first will have an 18-month window in which to reclaim a 3% Stamp Duty surcharge.

They will, however, have to pay the extra duty in the first place.

On the purchase of a £250,000 property, that will blow a £7,500 hole in a home-mover’s cashflow.

It could also be a swift hole, as the Government is also due to consult on another proposal, reducing the length of time for a ‘buy-to-let investor’ – but who might actually be a down-sizer or someone relocating for job reasons – to pay Stamp Duty Land Tax from 30 days to 14.

The figure of £7,500 is the difference between the £10,000 higher rate Stamp Duty and the £2,500 ordinarily paid.

The refund will not be available to home movers whose homes take longer than 18 months to sell.

The proposal is in the consultation over the extra Stamp Duty Land Tax levy on the purchase of second homes and rental properties.

The consultation says: “The Government believes that there should be a maximum 18-month period between sale of a previous main residence and purchase of a new main residence for the purpose of determining whether the higher rates apply.

“The Government is of the view that this is a sufficient period in the vast majority of cases.”

It goes on: “It may be difficult to determine whether an individual has an intention to sell their previous residential property at this point, and a careful balance needs to be struck by the Government to ensure that the tax system remains robust to tax avoidance and abuse.”

The consultation does, however, ask whether 18 months is a reasonable length of time.

However, not all purchasers of rental properties will have to pay the 3% surcharge. If the only property owned by someone is a buy-to-let, the owner will be exempt.

Also exempt will be buyers of six or more residential properties bought in a single transaction. The consultation says this does not count as a residential purchase. Exempt, too, will be purchases of mixed-use properties.

The new surcharge may apply to some sales that have gone through, or are going through, or which exchange between now and April 1.

The consultation says that the higher rates will apply to contracts exchanged after November 25, but which complete on or after April 1.

The new rules, as proposed, have been criticised as anti-marriage because the surcharge will apply where a married couple, or a couple in civil partnership, buy a second property.

The surcharge can, however, be avoided by an unmarried couple each owning or buying a property.

The surcharge will apply where parents either buy property for their children, or help them get on the property ladder via a joint purchase.

The Government launched the consultation on the Monday Bank Holiday at Christmas. It runs until February 1. Final details will be made available in the Budget on March 16, and the higher Stamp Duty rates will kick in on April 1.

While there is a tight timetable for the consultation, given the constraints of the Budget and the April 1 implementation, the five-week period – from December 28 to February 1 – is effectively more likely to run for nearer four weeks, from today, January 4, to February 1.

The timescale is much shorter than the 12 weeks minimum that the consultation itself notes is part of official criteria.

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2 Comments

  1. janeearley

    A very confusing article.  Should this not read..

    ‘The refund will not be available to home movers who, for example, DO NOT manage to sell within 18 months.’??

     

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  2. Rosalind Renshaw

    Sorry janeearley – I have now clarified that in the story.  The refund will only be available to those who manage to sell within 18 months.

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