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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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The new stamp duty guidelines for buying additional homes

Resolved Question:

Hello
The new stamp duty guidelines for buying additional homes are most confusing and incredibly unfair. I'm concerned that I am a victim in this because my situation was not considered properly before the new rules came into force.
Since 2012 I have owned a small 1 bedroom flat. In 2015 I moved in with my girlfriend into rented accommodation, with larger space, and let out my 1 bedroom flat.
When moving in together, the intention was for me and my partner to look for a family home to buy together. My girlfriend is a first time buyer. She is concerned she is being further priced out of the market because it appears that - because I already own a property (regardless of how small it is) - she is liable to pay the additional 3% stamp duty. This is ludicrous. Isn't the intention of this stamp duty excess meant to help first time buyers, not make housing further unaffordable to them?
The value of the family home we are looking to buy is far more than that of my flat. Why should the 3% charge be added to the family home, when it is the small existing property that is causing the additional stamp duty?
So I am faced with having to sell my flat, kicking out a very nice tenant after they have lived there for 15 months, because we can't afford to pay the extra stamp duty on the new home. Surely the purpose of the stamp duty change isn't for people to be forced out of their home?
Also, we have now found a house to buy, but because this transaction will go through BEFORE the sale of my flat and not on the same exact day (as tenants need 2 months notice), I will need to pay the additional 3% anyway! So I am having to pay excessive charges to exit my current mortgage deal and remortgage my flat to take out equity to pay for this extra stamp duty. I am paying to enter into a new 2 year agreement to remortgage, when I will have to exit the agreement after only a couple of months - which of course costs even more money to end it early. This also results in us being on a much higher mortgage rate for the new property as this 3% eats up a large proportion of what was intended to be our deposit.
In addition, I am not sure where the law stands with me being able to claim this 3% back once I have sold my flat, as, reading the guidelines, it seems this only applies when main homes are sold. My current main home is rented. The new property is not replacing my main home, and guidelines state that main home means a property I must own and live in.
This is all very confusing and we need answers as soon as possible. Bringing in this law and then inviting feedback from people on their feelings towards it may help those who are looking to buy in a few years should the rules be clarified or changed by then, but it is showing total disregard to the people it affects now. We do not currently know:
Whether I need to sell my flat before we buy a house
Whether I need to remortgage the flat and then sell it
Whether I need to remortgage the flat and not sell it
Whether we need to pay the additional 3% for the new property
Whether we will get that 3% refunded if we do have to pay it
This is not just affecting me and my girlfriend. It is affecting my tenant who doesn't know if they will be in the same home in a couple of months. And it is also having an impact on the vendor (and subsequent people in the chain) we are looking to buy from, as we need this clarified before the transaction can go through. I looked for clarification on my position from solicitors and financial advisers, but I received varying responses, and all of which lacked conviction, so I am no sure anyone knows for sure.
This is the biggest financial situation I am ever likely to be involved in and the uncertainty needs to be clarified now and not over the coming years.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

Hi.

If you buy the new home with your partner before you sell the flat you own solely, you will have to pay the stamp duty surcharge I'm afraid. However, if you own a property which has been your main home "at some point" in the 36 months leading up to the purchase of your new main home, then you will be able to claim a refund of the surcharge so long as you sell that previous main home within 3 years of buying your new main home. See paragraph 11 of section 2.8 here (read 36 months for 18) and the answer to the question "What if I need to buy another main residence before I can sell my last one?" here.

In summary, you said that you left your flat in 2015 so whatever day in 2015 was your last day in that flat is likely to be within the 36 months before you buy the new home with your partner. You don't need to be moving "directly" from your previous main home but your previous main home must have been your previous main home within the 36 months leading up to the purchase of a new main home in order to qualify for a surcharge refund.

I hope this helps but let me know if you have any further questions.

Customer: replied 1 year ago.
HiMany thanks for your quick reply. It does answer my questions very well.I reread my letter to you after I sent it and I apologise for the way I came across. The letter was initially written to send to the government who I blame for this uncertainty. I should have edited my tone before sending to you!Not sure the website procedures on a follow up question. I made a taxable profit last year in my rental property. But this year I will make a loss. I don't plan to let out a property after this year. I have yet to submit tax returns for the 2015-16 letting (to be done in Jan 2017). Can I offset the profit in anyway against the loss?Thanks
Expert:  TonyTax replied 1 year ago.

I just answer the tax questions. I don't make the rules so I know the frustration and criticism isn't aimed at me. My tax system would be different to what we have now if I was in charge.

You can carry forward a rental loss for use in future tax years against rental profit but you cannot backdate rental losses to an earlier tax year I'm afraid. Once you sell the property, any unrelieved losses will be lost unless you own other rental property.

Customer: replied 1 year ago.
Thanks. Much appreciated.
Expert:  TonyTax replied 1 year ago.

Thanks.

Would you mind rating my answer before you leave the site please.

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Expert:  TonyTax replied 1 year ago.

Just a clarification. If you sell your property with unrelieved rental losses, you can use unrelieved losses if you start to re-let property within 3 years.