New Stamp Duty change is looming...

[LDN]

I'm, for one, going to get screwed by this... I'm looking for a new home with my partner and will not be selling my current home as I want to keep it / let it out - but researching I found the following; copied from an article:

For someone who wishes to move house but decides not to sell their existing property at the same time, the higher rate of SDLT will apply. This is because even though they are replacing their main residence with a new one, at the end of the process they will own 2 properties. If the previous property is then sold within 18 months a refund of the higher SDLT rate can be applied for.

If someone decides to buy a new home as a main residence, but wants to rent out their existing home instead of selling it, they will be liable for the higher SDLT rate. This is because they will own 2 properties at the end of the process.

... so, how to get around that one? I see the logic but it stings. I bought my current place a long time ago and will be moving residence. But I'll still have to pay the higher tax if I want to keep my current place.

What's odd is that - if you have a BTL portfolio - and are just moving residence (selling your main residence to buy another) then you will not have to pay the higher rate.

And so; this brings me to my idea. I will draw up a rental agreement right now and rent the apartment to a friend. It is then officially BTL and I can say it's a part of my BTL portfolio. Can it be that simple????

[Jobbo]

What you are doing is in effect no different to staying in your current house and buying a BTL; when you complete, you have two properties, one of which is let out.

Your suggested workaround won't avoid the 3% surcharge; it's not based on the purchase of a main residence, it's based on both sale and purchase. At least the currently known consultation paper works that way. If you don't sell a property then you will not avoid the loading, irrespective of the main residence status of your purchase.

[Mr Overheads]

Sell your current house to your partner (presuming you're not married?)

You buy the new house in your name only.

[Eric Mc]

I am sure there will be anti-avoidance measures in the legislation to stop such shenanigans.

[LDN]

But what I'm saying is... how many people over the last few years might have moved out of their main residence and decided to keep / let it out? How far back must the 'move' have happened for it to be considered, officially, as part of ones BTL portfolio? I am thinking of moving out next week and moving into my fiancés fathers house whilst we look for somewhere... so my official main residence will in fact; not be mine...

[Eric Mc]

LDN said:

But what I'm saying is... how many people over the last few years might have moved out of their main residence and decided to keep / let it out? How far back must the 'move' have happened for it to be considered, officially, as part of ones BTL portfolio? I am thinking of moving out next week and moving into my fiancés fathers house whilst we look for somewhere... so my official main residence will in fact; not be mine...

It doesn't matter.

You already own a property.

If you buy another after 5 April, you will pay the extra Stamp Duty Land Tax on the new property(note - Stamp Duty itself was actually abolished around ten years ago).

If, within 18 months of buying the new property, you sell what had been your old main residence property, you will be able to reclaim the 3% surcharge.

[Jobbo]

LDN said:

But what I'm saying is... how many people over the last few years might have moved out of their main residence and decided to keep / let it out? How far back must the 'move' have happened for it to be considered, officially, as part of ones BTL portfolio?

Not relevant - if you own two or more properties at the end of the day of purchase, you pay the extra 3% SDLT on the purchase. If you then sell your old main residence within 18 months, at that point you get the refund. It's a multiple property tax, not just a BTL tax.

Why should people who decide to move while keeping their existing house and turning it into a letting property get a better deal than those who stay in the same house and buy an additional property as a BTL? It would be an obvious loophole.

ETA: interrupted while typing, but Eric and I are saying exactly the same thing.

[anonymous-user]

Is this new duty level on exchange or completion after April? ie exchange March but say unavoidable delay extends completion to April.

[Jobbo]

For completion from 1 April, you would have to have exchanged before 25 November 2015 to avoid it, unfortunately. That being the date it was announced. If you have not already exchanged, try to make sure you complete no later than 31 March.

[LDN]

You have to have completed by the deadline.

Just for the record and the source of what I'm saying is this paragraph from the same article I also quoted above:

Similarly a property investor who already owns a buy to let portoflio should not be liable for the the higher rate of stamp duty if they decide to move. Again this is because the owner plans to replace their main residence and there is no retrospective tax to pay on their existing buy to let portfolio.

[Jobbo]

You don't already own a buy to let portfolio though. That article is not the full picture but it's clear what is being referred to: if you own a house which you live in, and one or more BTLs, then you can sell your main house and buy another on the same date without paying the 3% loading. If you sell the previous main house later but within 18 months, you'll pay the 3% up front but can claim a refund on the later sale.

If you read through the consultation paper (which is the best we have for the moment) it will give you a better picture than an article: https://www.gov.uk/government/consultations/consul...

[Shaoxter]

Jobbo said:

For completion from 1 April, you would have to have exchanged before 25 November 2015 to avoid it, unfortunately. That being the date it was announced. If you have not already exchanged, try to make sure you complete no later than 31 March.

Do you have a source for the pre-25th Nov avoidance bit?
We exchanged on a new build which is completing in late April so heard rumours about this but haven't found anything concrete so far?

[Jobbo]

Yes, that consultation paper. It's the only thing we have to go on, and it's the only thing I've based my posts on. See section 2.3 headed 'Transition'.

[LDN]

Jobbo said:

You don't already own a buy to let portfolio though. That article is not the full picture but it's clear what is being referred to: if you own a house which you live in, and one or more BTLs, then you can sell your main house and buy another on the same date without paying the 3% loading. If you sell the previous main house later but within 18 months, you'll pay the 3% up front but can claim a refund on the later sale.

If you read through the consultation paper (which is the best we have for the moment) it will give you a better picture than an article: https://www.gov.uk/government/consultations/consul...

I do have a BTL portfolio... and so, moving out and into my father in laws property would mean that I'd add my current residence to my portfolio... I can't see why they'd not view my property as part of my portfolio if I have a rental agreement in place and I'm officially living in a home that is not my own whilst we hunt for our first home...

[Jobbo]

I've posted a link to the best information available to us - I'm not about to argue with you. Read it, ignore it, take the advice given here (independently by both me and Eric) or don't. Your choice.

[LDN]

Jobbo said:

I've posted a link to the best information available to us - I'm not about to argue with you. Read it, ignore it, take the advice given here (independently by both me and Eric) or don't. Your choice.

Not arguing at all; appreciate your posts. Reading through everything; I still can't see how what I propose as being 'wrong'... so I suppose I was looking for affirmation - I'll speak with my solicitor about it all - but at a glance, I'm not sure my plan is a bad one.

[Jobbo]

I still think you're missing the point - the exemption from the 3% loading for selling and replacing a main residence can only apply if you sell it. If you just redesignate it part of your BTL portfolio, you don't satisfy one of the fundamental criteria.

[okgo]

This has likely pushed me away from keeping my flat when I buy a house so I suppose the plan has worked in me not becoming a btl landlord.

[LDN]

Jobbo said:

I still think you're missing the point - the exemption from the 3% loading for selling and replacing a main residence can only apply if you sell it. If you just redesignate it part of your BTL portfolio, you don't satisfy one of the fundamental criteria.

Yes, I agree with this point but... what if I don't redesignate at the point of moving - but rather now. That's my point. How many people own property in a BTL portfolio that they have had as their home at one point? I hope you see what I mean but in any case will seek clarification.

[Muncher]

Cherie Blair is leading a judicial review into the change in the law at the moment on human rights and state aid grounds, it will be interesting to see what the result of that is.