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Can you pay less Stamp Duty on a second home?

Buying your second home before your main residence might avoid the additional 3% Stamp Duty Land Tax (SDLT) surcharge for those selling their home, purchasing an ‘additional property’ – such as a pied-à-terre, holiday home or buy-to-let – as well as a new home.

If you sell your home and are able to show that the first property you buy is not intended to be your new home, then when you do buy your new home you will not be liable for the 3% surcharge provided that you buy your new home within three years of the sale of your old home.

How does this work in practice?

For example, Neil, who is not married and only owns one property, is fed up of living in London. He wishes to move to the Cotswolds but retain a base in London. He intends to sell his London home (worth £2 million) and use the proceeds to buy two properties worth £1 million each at roughly the same time.

If he chose to buy the Cotswolds property first, then while he would not pay the surcharge on that transaction, he would when he buys the London property.

But if he chose to buy the London property first – perhaps moving into the property temporarily – and buys the Cotswolds property later, he wouldn’t pay the surcharge on either transaction, saving him £30,000.

This does not apply to people buying properties in Wales.

Choosing to use this sequence to avoid the surcharge applying on the London pied-à-terre (or buy-to-let) cannot possibly be described as tax avoidance

Expert opinion

Partner and Stamp Duty expert Sean Randall explains: “Choosing to use this sequence to avoid the surcharge applying on the London pied-à-terre (or buy-to-let) cannot possibly be described as tax avoidance.

“The buyer would not be abusing legislation; rather they would be making a reasonable choice and taking advantage of a freedom from taxation deliberately offered by Parliament.

“If Parliament wished to impose the surcharge in these circumstances, it must change the law and introduce the type of rule that the Welsh Assembly passed for the Welsh Stamp Duty surcharge.”

Would you like to know more?

If you would like to discuss whether you can take advantage of this SDLT saving, please get in touch with Sean using the form below.

You can also visit our Property & Construction Hub for more insights.