How much stamp duty do I need to pay if I own part of another property?

·3 min read
<span>Photograph: Yui Mok/PA</span>
Photograph: Yui Mok/PA

Q I am currently renting with my civil partner and we are looking to buy our first property together. Along with my sister and parents, I currently own a 7% share (equivalent to £17,000) in a flat that was bought in cash with inheritance that my father received after the death of my grandmother. Although my parents gave me the money equivalent to my share of the property a few years ago, I’m still on the deeds to the property and am in the process of removing myself from these.

What I’m really hoping you can help me with is working out how much stamp duty my partner and I should expect to pay when we buy our first property. Does my name being on the deeds to the flat mean we aren’t eligible for first-time buyers’ relief? Does my having owned a share of the property mean that the new property will count as a second home?

I would really appreciate it if you could give me any help or advice about this as it’s been confusing me for months.
DK

A For the past couple of hours it has been confusing me, too, but I think I’ve got to the bottom of it. What is crystal clear is that you will not have to pay the higher rate of stamp duty land tax (SDLT) on your new home – even though it is treated as a second property – because your share of the flat is worth less than £40,000. This would also be the case if the property you were buying was a mixture of residential and non-residential – such as a shop with a flat above – or you were buying a movable caravan, houseboat or mobile home (unless it has become a permanent fixture and no longer goes anywhere).

The government guidance gives the following example to illustrate why higher-rate SDLT is not payable: “A jointly owns a buy-to-let property with friends. The property is worth £150,000 with A’s share being worth £30,000. A is looking to buy a property to live in. A will not have to pay the higher rates of SDLT because A’s share of the buy-to-let property is under £40,000.”

When it comes to first-time buyers’ SDLT relief – which is available in England and Northern Ireland on properties costing £500,000 or less and charges 0% on the first £300,000 but 5% on the amount between £300,000 and £500,000 – it is pretty clear that, according to the guidance, “in order to count as a first-time buyer, a purchaser must not, either alone or with others, have previously acquired a major interest in a dwelling or an equivalent interest in land anywhere in the world”. This includes inherited or gifted property. So that would seem to be that. Except that there is a glimmer of light in that the guidance says: “Where a transaction is liable to the higher rates for additional dwellings in schedule 4ZA FA 2003, relief cannot be claimed.” This has suggested to some commentators that if the higher rates of SDLT are not due – as in your case – you can claim first-time buyers’ relief. But it seems to be a bit of a grey area, so I suggest that if you do go on to buying somewhere, you make use of a law firm that includes SDLT specialists.