If you’re buying a second home or additional properties in England and Northern Ireland, you usually have to pay a higher rate of Stamp Duty Land Tax (SDLT). This higher rate applies if the property costs at least £40,000 and adds 3% to the usual residential rates. However, if you’re replacing your main residence, you might not have to pay this extra charge. Here’s a clear guide on how to navigate these rules and save money.

What is Your Main Residence?

Your main residence is generally the home where you live most of the time. It’s usually easy to identify. For example, if you own a house where you live and a couple of rental properties, your main residence is the house where you live.

However, it can get tricky if you split your time between multiple homes. To determine your main home, consider where your family lives, where your children go to school, and where you’re registered to vote.

Even if you spend most of your time at a city flat during the week and go to your family home on weekends, your main residence would likely be the family home where your family is based full-time.

It’s important to note that your main residence for SDLT purposes might be different from the one you’ve nominated for capital gains tax.

Replacing Your Main Home Without Paying Extra SDLT

When you sell your old main home and buy a new one, you don’t need to pay the higher SDLT rate. Here’s how it works:

• Selling Before or at the Same Time as Buying: If you sell your old home before or at the same time as buying your new one, you only pay the standard SDLT rates.
• Buying Before Selling: If you buy your new home before selling your old one, you’ll temporarily own two main residences. In this case, you have to pay the higher SDLT rate on your new home. But don’t worry, you can reclaim this extra amount once you sell your old home, as long as it’s within three years.

How to Reclaim the SDLT Supplement

If you end up paying the higher SDLT rate because you bought your new home before selling your old one, you can get that extra 3% back. Here’s what you need to do:

1. Sell Your Old Home: Make sure to sell your previous main residence within three years of buying your new one. In some exceptional cases, this period can be extended.
2. Amend the SDLT Return: After selling your old home, you need to amend your SDLT return using form SDLT 16. This form shows that the purchase of your new home is no longer considered a higher-rate transaction.
3. Claim the Refund: Submit your claim within 12 months of selling your old home or within 12 months of the filing date for the SDLT return for your new home, whichever is later. Remember, the refund isn’t automatic—you have to claim it.

Example 1 – Straightforward Sale and Purchase: Emma sells her old home and buys a new one on the same day. Since she no longer owns two homes, she only pays the standard SDLT rates on her new home.

Example 2 – Overlapping Ownership: John buys a new house before selling his old one. He pays the higher SDLT rate on his new house because he temporarily owns two homes. Six months later, he sells his old home and claims a refund for the extra 3% SDLT he paid when buying his new house. He submits form SDLT 16 and receives his refund within a few weeks.

Changing your main residence doesn’t have to be costly if you understand the SDLT rules. By planning your transactions carefully and knowing how to claim refunds, you can avoid the extra 3% SDLT charge. Always keep an eye on the deadlines and make sure to submit the necessary forms to reclaim your money. If you’re ever unsure, seeking advice from a tax professional can help ensure you’re on the right track.