Do you pay higher rate SDLT if you sold your main home years ago, rented in between, and still own a foreign property?

Introduction

Many buyers assume that if they sold their old main home, moved into rented accommodation, and are now buying a new home to live in, they should avoid the higher rates of Stamp Duty Land Tax (SDLT). That is sometimes true, but only if the statutory conditions are met.

A common difficulty arises where the buyer still owns another dwelling somewhere else in the world, such as a holiday flat or inherited property overseas. In that situation, the key questions are whether the new purchase counts as a replacement of a main residence and whether the overseas property is ignored or taken into account.

This article explains how the rules work where a buyer sold a former UK main residence more than three years ago, has been renting since, and still owns a small property abroad.

The Question

A buyer sold their previous UK main residence several years ago and has lived in rented accommodation ever since while searching for a new home. They are now buying a new UK dwelling to live in as their only or main residence.

At the same time, they still own a small apartment overseas. It has not been occupied for a long time, and the buyer has not used it for several years.

The buyer wants to know whether the higher rates for additional dwellings apply, or whether the purchase can still be treated as a replacement of their only or main residence because they were merely renting in the gap between the sale and the new purchase.

Nick’s Explanation

Nick’s view was that the higher rates do apply in this situation if more than three years have passed since the disposal of the former main residence and the buyer still owns the overseas dwelling at the effective date of the new purchase.

In anonymised form, his reasoning was:

“The exemption from the higher rate, as a replacement of a main residence, only applies where the previous main residence was disposed of within three years of the new purchase. Because more than three years have passed, the replacement rules no longer apply, even if the buyer has only lived in rented accommodation in the meantime.”

He also explained that overseas dwellings are counted in the same way as UK dwellings for these purposes. If the overseas apartment is worth less than £40,000, it is disregarded. If it is worth more than £40,000, it is normally counted, and the surcharge applies unless it is disposed of before completion.

Nick also pointed out an important practical consequence: if the buyer does pay the higher rates in these circumstances, they cannot later reclaim that extra SDLT simply by selling the overseas property after the new purchase. The refund mechanism for replacing a main residence does not assist where the earlier sale of the old main home fell outside the statutory three-year window.

The Law

The higher rates for additional dwellings are contained in Schedule 4ZA to the Finance Act 2003.

In broad terms, the surcharge applies where, at the end of the day of the transaction, the purchaser owns a major interest in more than one dwelling and the new purchase is not excluded by the replacement of main residence rules.

The main provisions relevant here are:

• Schedule 4ZA Finance Act 2003, which sets out the higher rates for additional dwellings.
• Paragraph 3, which deals with replacement of a purchaser’s only or main residence.
• Paragraph 3(6), which addresses the position where a purchaser rents between disposing of the old main residence and acquiring the new one.
• Paragraph 9(2), which contains the spouse and civil partner rule treating them as a single unit for these purposes.
• Paragraph 17, which applies the rules to dwellings worldwide, including overseas property.

HMRC’s guidance at SDLTM09800 confirms that a short residential tenancy between the sale of the old home and the purchase of the new one does not by itself prevent the new purchase from being treated as a replacement. However, that does not remove the separate requirement that the old main residence must have been disposed of within the statutory time limit.

There is also a low-value rule. A dwelling with a market value of less than £40,000 is generally disregarded for the higher rates test.

Where buyers argue that a property should not count because it is uninhabitable or not suitable for use as a dwelling, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Mere disuse, neglect, inconvenience or the need for works will not usually be enough.

Analysis

The position can be worked through in stages.

First, ask whether the buyer owns another dwelling at the effective date of the new purchase. If the buyer still owns the overseas apartment on completion, that property is taken into account under Paragraph 17 unless it falls below the £40,000 value threshold.

Second, ask whether the new purchase qualifies as a replacement of the buyer’s only or main residence. This is where many buyers come unstuck. The fact that the buyer intends to live in the new property is not enough on its own. The legislation requires the previous only or main residence to have been disposed of within three years before the new purchase, subject to limited exceptions not suggested by these facts.

Third, consider the effect of renting in the meantime. Paragraph 3(6) and HMRC guidance at SDLTM09800 help only to the extent that a short tenancy does not break the chain between the old home and the new one. They do not extend the three-year deadline. So if the old main residence was sold more than three years before the new purchase, the replacement rules are generally lost.

Fourth, consider whether the overseas apartment can be ignored because it has not been occupied for years. Usually, no. The fact that a property has stood empty, has not been visited, or has not been used as a home recently does not by itself stop it being a dwelling for Schedule 4ZA purposes. If someone wanted to argue that it was not suitable for use as a dwelling, they would face a demanding test. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition threshold is relatively high. A property usually needs to be in genuinely serious condition before it falls outside the dwelling concept on that basis.

Fifth, consider the value of the overseas property. If its market value is less than £40,000, it is generally disregarded. In that case, assuming no other dwelling interests are held, the buyer may avoid the higher rates because they would not be treated as owning an additional dwelling at completion.

If, however, the overseas apartment is worth more than £40,000 and is still owned on completion, the higher rates will normally apply because:

• the buyer owns another dwelling worldwide, and
• the purchase is not treated as a replacement of a main residence because the previous main residence was sold more than three years earlier.

Finally, consider whether a later refund would be available. In this fact pattern, the answer is generally no. The refund rules are aimed at buyers who purchase a new main residence before selling the old one, then dispose of the old main residence within the permitted period. They do not rescue a case where the old main residence was already sold, but too long ago.

Outcome

If a buyer sold their previous main residence more than three years before buying the new one, then living in rented accommodation in the meantime does not preserve replacement treatment indefinitely.

If the buyer still owns an overseas dwelling worth more than £40,000 on completion, the higher rates of SDLT will usually apply.

The fact that the overseas property has been empty or unused for a long period does not usually change that. Nor is a refund normally available later if that overseas property is sold after the new purchase.

Practical Steps

A buyer in this position should usually do the following before exchange and completion:

• Confirm the exact completion date of the new purchase and the exact disposal date of the former main residence.
• Check whether more than three years have elapsed between those dates.
• Obtain reliable evidence of the current market value of the overseas property to see whether it is below or above £40,000.
• Consider whether the overseas property will still be owned at completion.
• If arguing that the overseas property is not a dwelling because it is not suitable for use, gather strong evidence of condition, bearing in mind the high threshold after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
• Check whether any spouse or civil partner ownership rules affect the analysis under Paragraph 9(2).
• Have the SDLT return position reviewed carefully before filing, especially if overseas assets are involved.

If the overseas property is worth more than £40,000 and cannot be disposed of before completion, the buyer should budget on the basis that the higher rates apply.

Conclusion

Renting between homes does not by itself trigger the higher SDLT rates, but it also does not extend the three-year replacement window. Where a former main residence was sold more than three years ago and the buyer still owns another dwelling overseas worth more than £40,000, the higher rates will usually be payable on the new UK home.

Legal References Used

• Finance Act 2003, Schedule 4ZA
• Finance Act 2003, Schedule 4ZA, Paragraph 3
• Finance Act 2003, Schedule 4ZA, Paragraph 3(6)
• Finance Act 2003, Schedule 4ZA, Paragraph 9(2)
• Finance Act 2003, Schedule 4ZA, Paragraph 17
• HMRC SDLT Manual, SDLTM09800
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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