So after I won my 7th Mr Olympia title, my wife and I decided it was time to upgrade and move to a larger, more modern house; I was thinking of a property reminiscent of those I see Kevin McCloud talking about…with an annexe for the servants and an East Wing to store all my trophies.
Anyway, after I woke up we decided to look for a new house for real! By complete chance we came across a new build, which was not quite finished and still needed a little work before we could move in. The guy who’d started the project had built it as his ‘dream home’, but ran out of funds shy of completing the project, leaving him no option but to sell. As such, it was going for a fantastic price and there was no way that we were going to let this slip through our fingers, we had to have it!
We knew this was going to get snapped up so we acted quickly, loaning the money from my father in law to purchase the house, and then repaying him once we’d sold our old house.
Once everything was completed we partied like it was 1999!
However, the partying was short-lived. To our shock we were slapped with a 3% charge for something called the ‘Second Home Charge’, all because we still owned our first home! We had no choice but to pay this because our new home was not ready to move into, yet we still needed somewhere to live.
If you’re looking to move house take note!
If you’re replacing your main residence and haven’t sold your first property by the time you’ve completed purchase of your new home, you have to pay the second home 3% charge!!
We were aware that we’d have to consider Stamp Duty Land Tax, which is charged when you buy property or land in excess of £125,000 if it is a residential property, or if you buy a non-residential property for over £150,000.
Take a look at the table below from the Government Website for Stamp Duty Rates.
|Property value||Residential – SDLT rate|
|Up to £125,000||Zero|
|The next £125,000 (the portion from £125,001 to £250,000)||2%|
|The next £675,000 (the portion from £250,001 to £925,000)||5%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||10%|
|The remaining amount (the portion above £1.5 million)||12%|
However, if you’re caught by the second home charge as we were, you’re charged an additional 3% on top of the above rates. For example, you’ll be charged 5% on a second home worth between £125,001 and £250,000 instead of 2%. It’s also worth noting that instead of zero, you’ll pay a 3% second home charge on properties costing between £40,000 and £125,000.
However, it’s not all bad news. We found out that it’s possible to claim the second home charge back once you’ve sold your previous property. We’ll have to claim a refund within 3 months of selling our old home, and we’ll need to complete a form called ‘Apply for a repayment of the higher rates for additional properties’. We also learnt that if we still have our old home after 3 years of paying the higher SDLT rates, then we would not be able to claim the charge back.