Could loophole save couples’ stamp duty charges?

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If someone buys a second home, they normally have to pay 3% stamp duty, but a legal loophole may have been found that could save couples paying this.

According to an article in the Daily Telegraph from September 2017, to use the loophole, a couple would need to live in the new home while renting out their other home on a buy-to-let basis.

The problem with this is that most lenders will not allow you to rent out your home for an extended period of time without converting the mortgage to a buy-to-let commercial mortgage, which will normally cost more in interest payments.

The loophole takes advantage of the legal definition of “major interest” in property. The law says that if a buyer has “major interest” in a first home, then buys a second home, they must pay the 3% stamp duty surcharge. If each person in a couple has a 50% share in the ownership of a house, it could be argued that neither partner has a “major interest”.

If one partner gives away a 5% share of the home, their share is reduced to 45%, and technically they still do not have a “major interest in the property and are not subject to the 3% stamp duty when buying another home.

Though the Telegraph outlines the stamp duty loophole, it does not show any cases where couples have actually used it to avoid extra stamp duty, so it is not certain whether couples can legally use the apparent loophole.

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