AIBU to think conveyancer wrong about Stamp Duty?

[ConfusedbyConveyancing]

Me and my fiancé are buying a house together. We currently own a property each; he owns a house and I own a flat. We currently live together in his house, and he is selling his house for us to buy the new house together. His house and the new house are both in the same Northern city, whereas my flat is ion down south. I'll continue to own my flat after we have bought the new house together.

Our conveyancer has said that he thinks we will have to pay the higher rate stamp duty on the new house we are buying (due on additional properties) because I will continue to own a residential property.

We both live in my partner’s house currently. There is a lodger living in my flat (not a tenant, as I still sleep there about once a week for work). I am included on the council tax at my partner’s house, our child goes to nursery close to his house, and we are all registered for the GP near his house.

I think that if we were to get married now then we would be (i) buying the new house as an individual, and (ii) replacing our main residence; and would therefore pay the normal rate of stamp duty. I used the gov.uk calculator Stamp Duty Land Tax Calculator to work it out.

I sent the conveyancer a link to the gov.uk stamp duty calculator showing we should attract the normal rate of stamp duty if we get married now, but he said his interpretation is that we will have to pay the higher rate regardless – without really explaining.

The property purchase price is £390,000, so the normal rate of stamp duty would be £9,500, whereas the higher rate would be £29,000. It’s a big difference. :/

Am I unreasonable to expect an explanation from the conveyancer, or is this not his job?

And have I understood the stamp duty rules wrong?

The online form we filled out during conveyancing.

DH sister has her property on the market and she enquired to another solicitor whether she would have to pay the higher rate if she was to buy another property after selling, and they said she would be. However we are in Wales so may be different?

@ConfusedbyConveyancing
You are right,
You currently have 2 properties.
At end of sell/buy you will still have 2 properties.
No additional (3rd) property, hence no additional SDLT

The easy solution here is he buys it solely in his name and then you get married and if you feel unsafe keep a clear track of what you pay for.

@ConfusedbyConveyancing I think you are partly correct. And most comments on here are wrong....
If you are replacing your main residence and selling your previous main residence, you will ot own any additional property after the transactions are complete and you pay the basic rate. The additional residential property does not matter, you would have already paid the higher rate on that purchase.

I can see issues in your situation though, and you should have a chat with your conveyancer to understand his thinking:

• if your husband owned your previous residence but not you, the. He is replacing his main residence, but are you? I'm not sure about the rules there, you will technically own an additional property.
• more worryingly, you technically have two main residence. Your other property isn't let, you do live there regularly, what are the rules around that?

Trust your conveyancer, or get a second opinion. Don't ask Mumsnet.

Fyi, I was in a similar situation when we bought together with my husband, and our conveyancer was also telling us we owned the higher rate, so I think your conveyancer is right. We didn't really push to know the reasons why, because luckily the property I jointly owned with my siblings belonged to a company and not us in person, so the basic rate applied anyway.

And care fees

At present though you own one property and so does your fiancé.
if you buy the new property together you’ll own two (the new house and your flat), he’ll still own one.

Even though you’re classing his house as your current main residence (as I understand it) you don’t own it so you’re not replacing your main residence in terms of a house you own. I believe ‘main’ residence would only come into play if you had a share in his house currently as well ie you owned two houses so needed to designate one as the main residence.

As someone else said, if he buys the new property in his name only then the extra wouldn’t be due. That’s down to you both still owning only one property after the transaction though.

As they aren’t married you’d look at the separately I believe I.e both currently own one property.

After the transaction he’d still have one but she’d have two (the flat and a part share of the new house) hence the additional stamp duty for a second home

Conflicting advice by all who have different experiences. I think OP should seek advice from another solicitor. Just in case, because if LTT is incorrectly paid, there is always a change they can find out and claim the outstanding amount, this is something we found out when we were trying to see if we could get away with just saying we didn’t have a share in another property.

Because 4 children are involved there won’t be much inheritance. And if it’s children that are inheriting the allowance is higher, £175k each, and my husband won’t be inheriting no where near that so unfortunately he’s been dealt a bad hand with having to pay the higher rate.

I'm not sure why people are seeing this as complicated. OP owns a property. It's irrelevant who lives there. She owns a property so the new house is a second property. There's a calculator on the bottom of each rightmove listing and it asks you if you already own a property. It's a straightforward yes or no

I’ve been through this myself but we were married. I contacted HMRC at the Land Tax helpline. They explained that because we were a married couple therefore treated as a single legal person, we were replacing our main home and not increasing our total number of properties it was normal stamp duty. It took some convincing the solicitors though. I noticed the solicitors changed their initial client contact form as a result of what I explained to them. Bet they’d over charged previous clients.

I think this answers the question!

images below because they didn’t upload!

Here they are:

You need to find out if being married or not if the important point.

OP will be increasing the amount of properties owned though. Yes of course they have 2 now, but I assume these were purchased separately and before they were together (?) and they didn’t have interest in each others properties, however, even though her partner is selling his and the new property will replace this main residence of theirs, OP has interest in another property that is in her name, regardless of who is living there.

So It’s all to do with what your main residency is and what the definition of legal residency is for stamp duty purposes. I don’t know how this is defined but I’d look it up and work out what your situation is defined as.

Good grief. Yes it's really awful to have interests in more than one property that mean 1. you hold greater assets than other people and 2. have greater tax liabilities due to having more assets.

In the case of the poster whose husband owns a share of his parent's house, this is probably to avoid inheritance tax when the parents die. The consequence is higher stamp duty liability for the husband, which presumably is less than the potential inheritance tax deducted from his parents' estates would be.

It's not awful unless really bad advice was given at the time he chose to take a share in the house. They've made that choice. Ffs - the entitlement of some people who have so much more than very many others.

It doesn't matter who owns what as they are buying as a single unit.
The main thing is clarifying your 'main residence'

I bought with my boyfriend at the time (now husband) I had moved in with him and was on council tax there, having let out my own place.

When we bought a joint after selling his no additional SDLT as that was my main residence.

I suppose you could argue the place down south is your 2nd residence.
HMRC will look at main residence where you have all your bills/doctors/council tax/registered to vote etc.

DH parents were given bad advice unfortunately. They did this (which is really frowned upon!) to avoid any future care costs (which obviously would affect what their children would have inherited anyway).

But inheritance tax won’t be avoided as the property, whilst worth over the £325k threshold, isn’t work much more over. And there is 4 of them, so if children are inheriting they have a personal threshold of £175k each and they wouldn’t reach this as the property is between 4 of them.

You only own 1 property, therefore when you buy another with your partner you are replacing your ‘main residence’ surely? It doesn’t matter that you rent it out or not as it is your only property so it must currently be your main one. Your partner selling his house isn’t relevant nor is whether your are married.

Adding to this… I know two people who didn’t declare homes abroad and were fined by HMRC… so fuck about to find out really. There is a 6 year threshold (I know this as one of these people consulted a very expensive lawyer) for HRMC clawing back the higher rate SD.

Wow. So the parents did this to avoid care costs. I have no sympathy. Why shouldn't people pay for the cost of their care or sell their assets to pay for it?

agreed.

I think DH (and myself) would be better of if he didn’t have a share in the property since it’s cost us a lot more in the long run with stamp duty. And while he would have inherited on their passing, it wouldn’t have been close to the threshold to where he would have to pay inheritance tax so he (and I) would have been better off this way.

But DH parents did act on bad advice, but unfortunately it’s their children who are having to pay additional tax if and when they sell and buy properties just so the parents could potentially avoid care costs (which would affect the inheritance I suppose but no where near the first extra amount of stamp duty being paid by the 4 children!)

There’s a list here about what may contribute to your partner’s house being your main residence:
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09812

Id go through this then I’d get clarification from HMRC what property counts as your main residency. I’d also ring your solictor and discuss rather than email so he can’t ignore your questions as I think they’re valid.

I think a lot of people think it’s a simple if you have more than one property situation but it’s a little more nuanced than that, you are allowed to replace your main residence and only pay the lower rate of stamp duty.

OP it sounds like 1) you don’t own the house you currently live in, your partner does and 2) you’re currently not married.

Assuming those things are true, yes you will have to pay. The confusion comes from the exemption for replacing your main residence. If you own two houses, live in one and rent one out, and you’re simply selling the one you live in to buy another, then yes you only pay the standard rate. Most of the posters on this thread who have said “well I have two houses and I only paid the standard rate” are in this category.

But you are not. You currently own one flat. You live in a house which you do not own. The HMRC guidance link provided above makes clear that if you live in a house which neither you nor your spouse own then it’s not your “main residence” for stamp duty purposes. Your flat is, because that’s the only property you own.

The transaction you intend to pursue will result in you going from owning one property to owning two. That’s exactly the kind of behaviour which the rules are intended to discourage. Therefore you will have to pay the higher rate.

You can avoid this by selling your current property within three years of buying the new one. You might be able to avoid it by marrying your partner before selling the old house. That would make it your main residence (because you live in it and your spouse owns it) for stamp duty purposes, so the “main home” exemption should apply.