Do both buyers need to sell their old homes to get an SDLT surcharge refund?

Introduction

People often ask this when two individuals each already own a home and then buy a new property together as their intended main residence. The main concern is usually whether the higher rates of Stamp Duty Land Tax (SDLT) will apply at purchase, and if so, what has to be sold later to recover the surcharge.

A related concern is whether Capital Gains Tax (CGT) main residence treatment has any effect on the SDLT refund. It does not operate under the same rules, so it is important not to mix the two regimes together.

The Question

In the scenario, two unmarried partners each own a separate dwelling. They plan to buy a new home together which they intend to occupy as their main residence. At the date of purchase, each of them will still own their existing property, so the higher rates for additional dwellings will apply.

One of the existing homes is expected to be sold shortly after the new purchase. The other may be retained for longer because it is being renovated and may not be sold for some time.

The questions are:

• Must both existing homes be sold within three years to recover the SDLT surcharge?
• How do the buyers show that the new property was intended to be their main residence from the outset?
• Does a CGT main residence nomination affect the SDLT refund position?
• Would transferring one of the retained properties to a company improve the tax outcome?
• If the property includes a house and about five acres of land, possibly with grazing by a local farmer, could it be treated as mixed-use?

Nick’s Explanation

Nick’s core view was that the purchase will attract the higher rates at the outset because, at completion, the buyers will still own other dwellings.

He explained that the refund rules do not require both old homes to be sold. The key point is whether the buyer seeking the refund has disposed of their previous main residence within three years of the effective date of the new purchase. In anonymised form, his explanation was:

“You do not need to sell both existing houses to reclaim the surcharge. Once the buyer’s own previous main residence is sold within the three-year period, a refund can be claimed. The other partner’s property can remain unsold or be sold later without blocking the refund.”

On the question of proving main residence intention, Nick said there is no formal statutory declaration required, but practical evidence matters. He pointed to matters such as moving in, council tax registration, electoral roll entries, post redirection, and updating GP and bank records.

On CGT, Nick’s explanation was that the CGT main residence rules are separate from SDLT. A CGT nomination under the Taxation of Chargeable Gains Act 1992 does not decide whether the SDLT refund is available.

He also said that transferring a dwelling to a company is usually not a tax-saving route in this type of case, because SDLT can arise on market value and the company may itself face the higher rates, with corporation tax implications on later disposal.

On the later mixed-use point, Nick’s response was cautious: whether a property is mixed-use depends on its characteristics and the factual use of the land, not simply on acreage.

The Law

SDLT on residential property is charged under Part 4 of Finance Act 2003. The higher rates for additional dwellings are contained in Schedule 4ZA to Finance Act 2003 and are applied through section 55.

Where a purchaser buys a dwelling and, at the effective date of the transaction, they have a major interest in another dwelling, the higher rates may apply. For joint purchasers, the tests are applied across the purchasers, so one purchaser’s existing dwelling ownership can affect the transaction.

The refund mechanism is found in Schedule 4ZA. In broad terms, where a new dwelling is bought as a replacement for a previous main residence but the old main residence has not yet been sold at completion, the higher rates may still have to be paid first. A refund can then be claimed if the previous main residence is disposed of within the permitted period. The source material specifically relied on paragraph 3(6) and paragraph 3(7) of Schedule 4ZA FA 2003.

For CGT, principal private residence relief is governed by the Taxation of Chargeable Gains Act 1992. Section 222(5) TCGA 1992 deals with nomination where an individual, or spouses or civil partners, have more than one residence. Those rules do not determine SDLT treatment under Schedule 4ZA.

If property is transferred to a company, section 53 FA 2003 may impose SDLT by reference to market value in connected party situations. In addition, a company acquiring a dwelling can itself fall within the higher rates rules in Schedule 4ZA.

On mixed-use, the question is whether the subject matter of the transaction is entirely residential, or includes non-residential land or property. The answer depends on the facts at completion. Land that is genuinely used for a commercial or agricultural purpose by someone else may in some cases support mixed-use treatment, but the existence, quality and reality of that use are critical.

If anyone is considering arguing that a dwelling was not suitable for use as a dwelling, it is important to note that the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Ordinary disrepair, renovation needs, or a property being inconvenient to occupy will not usually be enough.

Analysis

Step one is to identify the SDLT position at the date of purchase. If both buyers still own their existing homes when they complete on the new one, the higher rates are likely to apply because the buyers are acquiring a major interest in a dwelling while other dwellings are still owned.

Step two is to identify whose previous main residence is being replaced. This matters because the refund is linked to the disposal of a previous main residence, not to the disposal of every dwelling owned by everyone involved.

On the facts given, one buyer expects to sell their own current home shortly after the purchase of the new home. If that sold property was that buyer’s previous main residence, and the sale takes place within three years of the effective date of the new purchase, that is the event which can support a refund claim under Schedule 4ZA paragraph 3(6).

The other partner’s retained property does not automatically prevent the refund. The source material is clear on this point. The refund is not conditional on both old properties being sold. The important question is whether there has been a qualifying disposal of a previous main residence within the statutory time limit.

Step three is to consider the “intended main residence” requirement. Paragraph 3(7) of Schedule 4ZA requires that the new property is intended to be the purchaser’s only or main residence. There is no special form of declaration required by the legislation, but intention is a factual matter. If HMRC ever ask questions, they will look at what the buyers actually did. Useful evidence includes:

• moving into the new property as a home
• council tax registration
• electoral roll registration
• utility accounts
• GP and dentist registration
• bank and HMRC correspondence address changes
• post redirection
• the general pattern of occupation

Step four is to separate SDLT from CGT. A CGT principal private residence nomination is not the same thing as establishing main residence for SDLT refund purposes. SDLT asks whether the sold property was the buyer’s previous main residence and whether the new property was intended to be the new main residence. CGT relief and nomination questions arise under a different statute and for a different tax.

That means a CGT nomination by one partner does not, by itself, improve or damage the SDLT refund claim. The timing of that nomination does not alter the SDLT analysis in the source material.

Step five is to test whether a company transfer would help. In most straightforward private ownership situations, it does not. A transfer to a company can trigger SDLT on market value under section 53 FA 2003, the company may face the higher rates on acquisition, and later gains may fall within corporation tax. That often creates more tax cost, not less.

Step six is the mixed-use question. A house with about five acres is not mixed-use simply because the land is extensive. The key issue is whether, at completion, part of the property is genuinely non-residential in character or use. Informal grazing by a local farmer may or may not be enough depending on the facts. Relevant points would include:

• whether there is a real grazing licence or other agreement
• whether the grazing is active, regular and commercial
• whether the land is physically and functionally separate from the dwelling’s garden and grounds
• whether the land is being enjoyed as part of the residence, or instead used for a distinct non-residential purpose
• what the position is at the effective date of the transaction

Where the grazing is casual, undocumented or merely permissive, HMRC may argue that the land remains part of the residential grounds. Mixed-use treatment should therefore not be assumed without careful factual review.

Outcome

The practical answer is that both buyers do not need to sell both old homes to recover the SDLT surcharge. If one buyer sells their own previous main residence within three years of buying the new joint home, that can support a refund claim, even if the other partner still owns another property.

The new property should genuinely be intended as the buyers’ main residence from the outset, and they should keep ordinary real-world evidence of that intention and occupation.

A CGT main residence nomination is a separate matter and does not govern the SDLT refund claim.

Transferring a retained property to a company is usually not a helpful workaround and may increase the overall tax burden.

Mixed-use treatment for a house with land is highly fact-sensitive. Five acres and occasional grazing do not automatically make the purchase mixed-use.

Practical Steps

• Confirm which existing property was the relevant buyer’s previous main residence before the new purchase.
• Keep evidence showing that the new property was intended to be, and became, the main residence from completion or shortly afterwards.
• Track the date of sale of the previous main residence carefully to ensure it falls within the three-year period in Schedule 4ZA paragraph 3(6).
• Keep completion statements, SDLT return details and proof of the later sale so a refund claim can be made promptly.
• Do not assume CGT residence treatment determines SDLT treatment; review each tax separately.
• Be cautious before transferring property to a company, as that can create fresh SDLT and direct tax charges.
• If considering a mixed-use argument, gather full evidence about the land use at completion, including any grazing agreement, payments, boundaries, photographs and how the land is actually used.
• If considering any “unsuitable for use” argument instead, remember that the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Conclusion

Where two partners each own a home and buy a new main residence together, the higher SDLT rates may be payable up front. But a refund does not depend on both old homes being sold. The key is whether there is a qualifying disposal of the relevant buyer’s previous main residence within three years, and whether the new property was genuinely intended to be the main residence from the start.

Legal References Used

• Finance Act 2003, section 55
• Finance Act 2003, Schedule 4ZA
• Finance Act 2003, Schedule 4ZA paragraph 1
• Finance Act 2003, Schedule 4ZA paragraph 3(6)
• Finance Act 2003, Schedule 4ZA paragraph 3(7)
• Finance Act 2003, section 53
• Taxation of Chargeable Gains Act 1992
• Taxation of Chargeable Gains Act 1992, section 222(5)
• 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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