Legal Q&A:how do the new stamp duty rules work?

We are buying a new house and wish to gift our family home to our children. I believe our family residence will be exempt from capital gains tax but will stamp duty be payable on both properties and will we have to pay the higher rate on our new property? 

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Question: I am in the process of moving house and I want to make a gift to my son and daughter of our current house, where we have lived for many years.

If I decide to go ahead and do this, will we have to pay stamp duty on the property we wish to gift, as well as the place we intend to buy?

Also, if my wife and I have to buy the house we are moving to before we make a gift of our current home, will we have to pay stamp duty at the new higher rate?

I read that if the transaction — the gift in our case — takes place within 36 months after purchase of the second home, we can claim a repayment of the stamp duty.

I believe no capital gains tax will be payable because the house to be gifted has always been our family residence.

Answer: With regard to the proposed gift, stamp duty falls on the “purchaser” of a property, so your children, rather than you and your wife, will be potentially liable to pay the duty on the house you give them. However, if your property is mortgage free and your children do not pay you anything for it — do note that money or any other form of benefit counts for these purposes — there should be no stamp duty liability on them.

If you do not gift your current house prior to purchasing your new property, you will be liable to the additional three per cent stamp duty on top of the normal rate on your new home, as you will own more than one residential property on the day of completion. However, you may be able to claim back the additional three per cent that you will have paid, if you dispose of your old main residence within 36 months.

Assuming that your old home has always been used as your primary residence, you should be able to claim principal private residence relief. So you are correct in thinking there should be no capital gains tax liability on the gift.


If you have a question for Fiona McNulty, please email or write to Legal Solutions, Homes & Property, London Evening Standard, 2 Derry Street, W8 5EE.

We regret that questions cannot be answered individually, but we will try to feature them here. Fiona McNulty is a legal director in the private wealth group of Foot Anstey.

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