Land of Song Tax: additional dwelling surcharges

/ 3 March 2023

Andrew Levene

And here is the third in our trilogy of pieces on Stamp Duty Land Tax (‘SDLT’) and its Scottish and Welsh equivalents,* again focussing on purchases of additional dwellings.  It highlights an opportunity which is available in England and Scotland; but not in Wales.

Mr and Mrs Jones are considering retirement, as are their friends and neighbours Mr and Mrs Smith.  In each case the only property they own is their home.  They’re planning on retiring, downsizing and investing some of the capital into a holiday home (or a buy-to-let – the same principles will apply).

Mr and Mrs Jones sell their current home, buy their new home and, with what’s left over, buy their holiday home (in that order, though reversing the order of the first two would usually make no difference).  They won’t normally pay the additional dwelling surcharge on the retirement property; but they will pay it on the holiday home.

Mr and Mrs Smith sell their current home and move in to rented accommodation (or perhaps impose themselves on their children) while they look around for their ideal retirement property.  Meanwhile they buy their holiday home.  Finally, they buy their new main residence.  They won’t normally pay the additional dwelling surcharge on the new main residence: but they won’t pay it on the holiday home either.

At least, they won’t if the holiday home is in England or Scotland.  They will if it’s in Wales.  Uniquely in the Land of Song, a special rule applies: if a replacement main residence is exempt from the additional dwelling surcharge (as it usually will be), then any dwelling purchased in the ‘intermediate period’ between selling the old home and buying the new one isn’t.

Why does the Welsh Assembly perceive this to be a loophole that has to be countered by complicating the legislation while the UK and Scottish parliaments don’t?  Dw I ddim yn gwybod.

For more information about UK property taxes and how they would apply to your plans, please get in touch with your usual BKL contact or use our enquiry form.

Parts I and II of the trilogy:

Andrew Levene

Director of Property Taxes

T +44 (0)20 8922 9394
E andrew.levene@bkl.co.uk

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