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I own a buy to let property. Do I need to pay the extra stamp duty?

By Jo Eccles

Q: I already own a rental property and am now buying for myself; will I have to pay the extra 3% stamp duty?

A: Stamp duty (SDLT) changed yet again on the 1st April this year. The new rules mean that if you’re buying an additional home, you will be charged an extra 3% SDLT on your purchase.

The key question to ask is: how many properties will you own at the end of the calendar day of the transaction? If your answer is one then the extra 3% SDLT does not apply, regardless of what the property will be used for.

If your answer is two or more, then there are a number of outcomes. Bear in mind that you will be deemed to own more than one property even if you own just a share in one already – if your share is worth more than £40,000.

The next question to ask is whether the property being purchased is replacing your main residence which is being sold. If the answer is no, then the higher rate will apply and there are a few examples of how this could play out. For example, if you already own a primary residence and you’re buying a buy-to-let investment then you will have to pay the extra 3% SDLT. Equally, if you’re buying a property jointly with other people and any of them already own one or more houses, this also means you will need to pay the higher rate.

Buyers who get penalised under these rules are usually those who own a buy-to-let property but not a main residence – perhaps you’re living with parents or renting instead. This means that when you do go to buy your own home, you will be subject to the higher rate because you own more than one property on the date of acquisition, and the new property is not replacing the existing one.

If, however, you already own a buy-to-let property and a primary residence, but you’re buying a replacement main residence and selling your existing one at the same time, you don’t pay the extra SDLT; this is as long as you tie in the completion of the sale of your existing home and the purchase of your replacement.

Additionally, if you don’t sell your existing main residence at the same time as completing on the new one but do sell it within 36 months, then a refund for the extra SDLT can be claimed. This is an important point to bear in mind for owners getting divorced, for example, where both names may still be on the deeds of the main marital home.

Your solicitor who acts for you on your purchase will be the one to register the SDLT payment with HMRC so I always recommend you speak to them for specific questions or advice.

If you have a question you’d like Jo to answer please email Jo.eccles@SPproperty.com or tweet her @joeccles.