Loopholes highlighted as Stamp Duty rates increase

A little-known tax loophole means some buyers of second homes and buy-to-let investors could be exempt from the higher rates of stamp duty that come into force today.

The Budget appeared to leave the new stamp duty regime relatively unchanged and many landlords thought they had been given no respite from the tax rise.

But because of a little-known loophole, which first appeared in a consultation response published on March 16, some landlords and second-home owners might be exempt from the 3 percentage point stamp duty surcharge on second properties.

For existing property owners to be exempt, they must be buying a main residence rather than a second home or investment property and have previously owned another main residence that they sold at any time before the announcement of the stamp duty surcharge on November 26 2015.

Anyone who fits these criteria has until November 26 2018 – three years after the announcement in last year’s Autumn Statement – to buy an additional home without paying the extra stamp duty.

For example, a landlord who owns buy-to-let properties but currently lives in rented accommodation and sold their previous home before November 2015 can buy a new home in London without paying the surcharge.

Someone who part-owns a property which is lived in by family, but does not own their own home, and sold a  home before November 2015, would also be exempt.

In general, those who sell a main residence now have 36 months to buy a new one without paying the extra tax.

The Treasury confirmed the existence of the loophole in a relevant passage in the consultation document.

The paragraph reads: “The 36-month time period will commence from 25 November 2015 for those who had sold a previous main residence prior to the Spending Review and Autumn Statement 2015, in order to provide additional transitional support.”

Despite this, some borrowers may still be under the impression that they have to pay the surcharge, and after the announcement some letting organisations were continuing to advise borrowers that they would be liable.