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Will I have to pay higher-rate stamp duty if I keep a rental flat?

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Q I bought a flat in 2016 and lived there for a couple of years. I then got married in 2018 and moved in to my husband’s house, which he’d bought in 2015 and which remains solely in his name. I’ve been renting out my flat ever since. We now plan to sell the house we live in and buy a new one. If I keep my rental flat will I be liable for higher rates of stamp duty?

A No, I don’t think that you will be liable for the higher rate of stamp duty land tax (SDLT) and this is why. As luck would have it, I came across an illuminating example in HM Revenue and Customs’ (HMRC) online Stamp Duty Land Tax Manual which describes your situation almost exactly (if it weren’t for the fact that it’s the husband who has the rental property and they both live in the wife’s house). Substituting you for Mr S (in the HMRC example) and your husband for Mrs S, this is how it reads: “Mr and Mrs A, a married couple, each own a residential property, with neither having any interest in the other’s property. They both live in the property owned by Mr A; the property owned by Mrs A is rented out. Mr A is selling his property and they are jointly purchasing a new one, which will be their new main residence. Mrs A will retain her rented out property.”

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I will spare you the next bit of technical explanation (but you can always look online if you’re interested) and move on to HMRC’s conclusion that: “The higher rates will not apply to the joint purchase by Mr and Mrs A of a new main residence. As they are married and have both lived in the property owned by Mr A as their main residence Mrs A will be treated as replacing their main residence. Mr A only owned one property at the end of the day of the transaction.”

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If you hadn’t lived in your husband’s house as your main residence before he sold it, you would have to pay the higher rate of SDLT as would an unmarried couple in the same situation as you (which forms the basis of the next online HMRC example).