If you buy a second residential property in England, you’ll usually have to pay a Stamp Duty Land Tax (SDLT) supplement.
This additional charge is currently 5% on top of the normal residential SDLT rates and applies when the purchase price is £40,000 or more.
However, the rules are different if you’re replacing your main residence. In many cases, the extra charge doesn’t apply at all.
Let’s look at how it works.
When Does the SDLT Supplement Apply?
The SDLT supplement normally applies when you buy a residential property and already own one or more other properties.
This includes situations such as:
- Buying a second home
- Purchasing an investment property
- Buying a holiday property
In these cases, the additional 5% SDLT charge is added on top of the standard SDLT rates.
When Is the Supplement Not Payable?
If you’re replacing your main residence, the SDLT supplement may not apply.
For this to happen, both of the following conditions must be met:
- The new property becomes your main residence
- Your previous main residence is sold within 36 months of completing the purchase of the new one
If both conditions are satisfied, you’ll only pay standard residential SDLT rates, not the additional supplement.
What If the Old Home Hasn’t Sold Yet?
Sometimes the timing doesn’t work out perfectly.
You might complete the purchase of your new home before selling your previous one.
If that happens, the SDLT supplement will usually still be charged at the time of purchase.
But there is good news.
If your previous main residence is sold within 36 months, you can claim a refund of the supplement.
Example: Exchanging Your Main Residence
Matt and Lucy own two investment properties as well as their main home.
They sell their current home and buy a new property that will become their new main residence.
Both the sale of the old home and the purchase of the new one complete on the same day.
Because they are replacing their main residence, the SDLT supplement does not apply. They simply pay SDLT at the standard residential rates.
Example: Paying the Supplement and Claiming It Back
Alicia owns a holiday cottage as well as her main home.
She buys a new property closer to her family for £500,000, completing on 1 March.
However, the sale of her previous home is delayed and doesn’t complete until 16 April.
Because she still owned her old home on the day she completed the purchase, Alicia must pay SDLT including the 5% supplement.
Her total SDLT bill is £40,000, including £25,000 of additional SDLT.
Once her previous home sells, she can claim back the £25,000 supplement.
How Do You Claim an SDLT Refund?
The refund isn’t issued automatically — you must submit a claim to HMRC.
To qualify for a refund:
- Your previous main residence must be sold within 3 years of buying the new home
There are also time limits for submitting the claim.
HMRC must receive the claim by the later of:
- 12 months after the sale of the previous main residence, or
- 12 months after the SDLT return filing deadline for the new property purchase
An SDLT return normally needs to be filed within 14 days of completion.
In some exceptional circumstances, HMRC may still accept claims where the property took longer than three years to sell.
Final Thoughts
The SDLT rules around replacing your main residence can be confusing, especially if the sale and purchase don’t complete on the same day.
The key points to remember are:
- The 5% SDLT supplement usually applies to additional properties
- It doesn’t apply when you replace your main home
- If you pay it temporarily, you may be able to claim it back once your previous home sells
Understanding the rules could help ensure you don’t pay more SDLT than necessary.
Need Help Understanding SDLT When Moving Home?
If you’re buying a new property or replacing your main residence, it’s worth checking how the SDLT rules apply to your situation.
At Jon Davies Accountants, we help individuals and business owners understand the tax implications of property transactions.
Get in touch with Jon or the team today if you’d like help reviewing the SDLT position on your property purchase.
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