A supplement applies on top of the residential stamp duty rates where a person has two or more residential properties. The supplement is set at 5% and applies where the consideration for the second or subsequent property is £40,000 or more.

However, special rules apply where a person replaces their main residence and the SDLT supplement is not payable where both of the following conditions are met:

• the new property replaces the main residence; and

• the former main residence is sold within 36 months of the date of completion of the main residence.

However, if the former main residence has not been sold on the day on which the purchase of the new main residence completes, the supplement will initially be payable on the purchase of the new main residence. However, if the former main residence is sold within 36 months of completion of the new main residence, a refund of the supplement can be claimed.

Example 1

Matt and Lucy own two investment properties in addition to their main residence. They sell their main residence and buy a new home which becomes their main residence. The sale of the old main residence and the purchase of the new main residence complete on the same day. SDLT is payable at the residential rates on the purchase of the new main residence. The supplement does not apply as the couple are exchanging their main residence.

Example 2

Alicia has a holiday cottage in addition to her main residence. She buys a new home nearer to her family. The sale of the new home, which costs £500,000, completes on 1 March. However, the sale of her old home is delayed and does not complete until 16 April.

As Alicia has not completed on the sale of her old home when she completes on the purchase of her new home, she must pay SDLT at the residential rates plus the 5% supplement. Her SDLT bill is £40,000 of which £25,000 is the SDLT supplement.

When the sale of her former main residence completes, Alicia can claim a refund of the £25,000 SDLT supplement.

Claiming a refund

Where an SDLT supplement is paid because the sale of the former main residence completes after the purchase of the new main residence, the supplement is refunded. The refund must be claimed – it is not given automatically. To claim the refund, the former main residence must have been sold within three years of the completion of the purchase of the new main residence. In exceptional circumstances, it may be possible to claim a refund if it took more than three years to sell the former main residence.

The refund claim can be made online and HMRC must receive the claim by the later of 12 months after the date of sale of the former main residence and 12 months from the filing date of the SDLT return for the new main residence. An SDLT return must be filed within 14 days of the completion date.