Surprise quirk in stamp duty rules turns up the heat on Welsh buyers
Home buyers in Wales have been dealt a tax blow relating to the devolution of stamp duty to the principality’s government next year. It is unrelated to Wednesday’s Budget announcements, but highlights the increasing complexity of the stamp duty system.
The group affected comprises buyers who own more than one property and who had been expecting to use a loophole in the stamp duty regulations to replace their main home before November 2018, and by doing so avoid paying the additional duty surcharge. It has now emerged that if they wish to buy a property in Wales (not elsewhere) they will need to do so by April 2018, if they are to avoid the extra duty, rather than November.
The 3 percentage point surcharge was introduced in April 2016 for those buying properties in addition to their home. A loophole meant that anyone who owned multiple properties – but had sold a main home before November 2015 – was given 36 months to purchase a replacement home without being liable for the surcharge.
But incoming changes to the tax regime in Wales mean these people, who were expecting to have until November next year, must purchase their new home by April – a time frame of just four months.
This is the situation Telegraph Money reader Phil Williams finds himself in. The designer, aged 53, sold his home in 2008 and has lived in rented accommodation in Wrexham ever since. He also owns a property that is rented out. Without the loophole, he would be liable to pay the surcharge if and when he buys a replacement home.
He is seeking to buy in Wales with a budget of £450,000. Without the surcharge, this would incur a £12,500 tax bill. With the surcharge he would pay £26,000.
HM Revenue & Customs initially confirmed he had until November 17 2018 to make his purchase. But, in Wales, stamp duty will be replaced by land transaction tax from April.
Mark Drakeford, the cabinet member for finance in the Welsh Assembly, has now confirmed that beyond that date Mr Williams would be liable to pay the surcharge, and that the Welsh regime will not recognise the previous deadline.
“Buying a house could take 12 weeks or it could take 12 months,” said Mr Williams. “If I don’t buy soon I’m stuck.”
He said the blow has forced him to consider moving to England: “The irony is if I moved 12 miles to England I wouldn’t have to pay.”
The Welsh Government confirmed that those who sold before November 2015 will have to buy a property by April 2018 to qualify for the lower rate. Those who sold after November 2015 will have the standard 36 months exemption period.