• Stamp Duty On Second Homes

    By Guest on 23rd Feb 2017

    I'm going to be buying a second home with my partner and we've just found out about the additional 3% stamp duty on second jones applied to the WHOLE purchase price. I'm only going to own a 20% share which comes in at £32k. I've read that it doesn't apply to purchases under £40k but can't get clarity on whether that's the property value or my share. Can someone help?

  • 2 Answers

    By Guest on 23/02/2017

    Sorry, that should say second HOMES!

  • By Guest on 25/02/2017

    If the consideration paid for the transaction as a whole (irrespective of individual contributions) is £40,000 or more than the higher rate applies to whole purchase price. If you both only own one other property and each individual share is worth less than £40,000 then you shouldn't pay the higher rate on your new purchase. That's because according to s128 (3) 3 (4) of the Finance Act 2016 an existing dwelling is only taken into consideration if "(a)the purchaser has a major interest in a dwelling other than the purchased dwelling and (b)that interest has a market value of £40,000 or more" This test is to be applied to each purchaser of the new dwelling individually. So for example if you jointly own one property worth less than £80,000 then neither of you have an interest in another dwelling worth £40,000 or more. If you have multiple dwellings each worth less than £80,000 then it's a grey area as it's unclear what the position would be if the aggregate value of your interests in other dwellings was more than £40,000 but no single interest was worth more than £40,000.

    One possible loophole (though I don't recommend trying it without getting specialist advice from a tax lawyer and it does create other risks) where you owned a property jointly with someone else and wanted to buy a second home would be to enter into a trust arrangement which said you hold the existing property in unequal shares so as to reduce the value of your interest below £40,000. For example so you own a property worth £200,000, you could agree that you were entitled to 19% of the equity and the joint owner the other 81%. You could then buy the second home in your sole name. This wouldn't work however if you were married or in a civil partnership with the joint owner of your current property.

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