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The SDLT supplement and changing your main residence

In most cases, a higher rate of stamp duty land tax (SDLT) applies to the purchase of second and subsequent residential properties in England and Northern Ireland where the consideration is at least £40,000. The supplement increases the residential rates by 3%.

However, even where a person owns two or more properties, they can replace their ‘main residence’ without having to pay the supplement.

The ‘main’ residence

It will usually be clear which property is a person’s main residence. For example, if a person has one house in which they live plus two investment properties that they rent out, the house in which they live will be their main residence. However, where they split their time between two or more properties, it is necessary to consider the facts as to which is their main home, taking into account where the taxpayer’s family is based, where the children go to school, where the taxpayer is registered to vote, etc. The main residence may not be the place where the taxpayer spends most of their time. For example, if the taxpayer has a city flat in which he lives Monday to Friday and a family home where the family are based full-time and he spends his weekend, the family home will be considered the main residence.

The main residence for SDLT may not necessarily be that nominated as such for capital gains tax purposes.

Exchanging the main home

The SDLT supplement does not apply where the taxpayer exchanges his or her main home. The position is straightforward if the sale of the former home completes before or at the same time as the purchase of the new home. In this situation SDLT is charged at the normal residential rates.

However, if the purchase of the new home completes before the sale of the old home so that the taxpayer owns both the new and old main residences simultaneously, the SDLT supplement must initially be paid on the purchase of the new home on top of the usual residential rates. However, the supplement element can be reclaimed when the former main residence is sold, as long as this is within three years of the date on which the new main residence was purchased. In exceptional circumstances, this period may be extended.

To claim the refund, the SDLT return must be amended using form SDLT 16 to show that the purchase of the new residence is no longer a higher rate transaction. This must be done within 12 months of the sale of the previous residence or, if later, 12 months of the filing date for the SDLT return for the new main residence. It is important to claim the refund as it is not given automatically.