Introduction 

If you are looking to purchase or invest in a retirement property you need to know that there are no special or specific concessions from Stamp Duty Land Tax (“SDLT” or stamp duty) for retirement properties or empty nesters downsizing to a bungalow or smaller property.

What is SDLT?

SDLT is a tax charged on the acquisition of land and buildings in England and Northern Ireland and it is charged according to a scale of rates that depends on whether the property acquired is residential or commercial or is of mixed residential and non-residential use. You can check the rates here. Retirement homes are classed as residential and attract higher residential rates of stamp duty compared with commercial rates.

Do you pay stamp duty on retirement property?

Yes, you do pay SDLT on retirement property. Retirement property is treated for SDLT just like the purchase of any other house or bungalow. This means that unless you sell your existing home when you buy your retirement home, the retirement property will count as an additional dwelling and so the 3% additional rates will apply to the purchase price on top of the normal rates of stamp duty. You can apply for a refund of the 3% rate however if you dispose of your old home within (normally) three years of the purchase of the retirement home.

If you are buying a retirement property as an investment property and are not replacing your main home or have other investment properties, then the 3% additional rates will not be refundable.

Do I pay stamp duty if I buy a retirement flat for my parents?

Yes, you do pay stamp duty if you buy a retirement flat for your parents. If you own any other dwelling such as your own home, then the retirement flat will count as an additional dwelling and so the 3% additional rates will also apply to your purchase.

Do I pay stamp duty when I downsize to a smaller property?

Yes, you do pay stamp duty if you downsize. You will pay SDLT on the amount of the purchase price of the property you are downsizing to, including the 3% higher rates for additional dwellings if you have not sold your old home. A refund of the 3% additional rates can be claimed if you sell your previous home within (normally) three years.

Do you pay Inheritance Tax if you inherit a retirement property?

Yes, you normally pay Inheritance Tax if you inherit a retirement property unless you are the spouse of the deceased or certain exclusions for trusts, non-UK domiciled deceased persons or trusts and foreign properties apply. Retirement property is treated like any other property for Inheritance Tax. There is no special exemption from Inheritance Tax for retirement properties.

Do you pay stamp duty when you inherit a retirement property?

You do not normally pay stamp duty when you inherit a retirement property either under the will of the deceased person or if they die without leaving a will. However, if you pay anything to get the property other than taking over any mortgage then you will have to pay stamp duty.

If there is a variation of a will or the intestacy that occurs within two years of the death and nothing is paid for the property then no stamp duty will be payable.

Conclusion

There are no special exemptions from stamp duty for purchasing or investing in retirement properties so the normal very complex SDLT rates and rules will apply. With stamp duty rates of up to 17% applying care should be taken before you commit to a retirement property. Specialist tax advice is essential so that you can plan the cost of your intended purchase and budget accordingly. This will also include being advised about any potential refunds from HMRC for the 3% additional rates paid on the property and if applicable, the 2% non-UK resident surcharge paid if you buy the property when you are not yet resident in the UK.

How Cannon Chambers can help

Cannon Chambers is a Tax Chamber and has expertise in a wide range of private client tax and financial crime disputes. If you need advice on the tax treatment of retirement property contact us with your enquiry.