Wife buying a property
Discussion
Hello
My wife is looking to buy a property for her parents to live in nearby. The property wouldn't need a mortgage but we're wondering if she would be liable for the 2nd home additional 3% stamp duty.. and also if this is classified as an investment property, and therefore subject to CGT if she sold it. She currently doesn't own any property.
An alternative would be to buy it in her parents' name to avoid all the issues above, but we'd rather not for inheritance tax reasons.
Many thanks
Al
My wife is looking to buy a property for her parents to live in nearby. The property wouldn't need a mortgage but we're wondering if she would be liable for the 2nd home additional 3% stamp duty.. and also if this is classified as an investment property, and therefore subject to CGT if she sold it. She currently doesn't own any property.
An alternative would be to buy it in her parents' name to avoid all the issues above, but we'd rather not for inheritance tax reasons.
Many thanks
Al
alphonso said:
Hello
My wife is looking to buy a property for her parents to live in nearby. The property wouldn't need a mortgage but we're wondering if she would be liable for the 2nd home additional 3% stamp duty.. and also if this is classified as an investment property, and therefore subject to CGT if she sold it. She currently doesn't own any property.
An alternative would be to buy it in her parents' name to avoid all the issues above, but we'd rather not for inheritance tax reasons.
Many thanks
Al
My understanding is that a man and wife are counted as a unit in the respect of buying and selling property.My wife is looking to buy a property for her parents to live in nearby. The property wouldn't need a mortgage but we're wondering if she would be liable for the 2nd home additional 3% stamp duty.. and also if this is classified as an investment property, and therefore subject to CGT if she sold it. She currently doesn't own any property.
An alternative would be to buy it in her parents' name to avoid all the issues above, but we'd rather not for inheritance tax reasons.
Many thanks
Al
An unmarried couple can own a property each and class the property they own individually as their primary residence - therefore avoiding CGT on the sale. A married couple cannot do this.
http://www.telegraph.co.uk/finance/personalfinance...
If you and your wife already own a property (even if it is in your sole name) - then it will be classed as a joint asset. Any property she buys (even if in her sole name) will be classed as a second home and therefore subject to all of the taxes due on such a property.
The only get out is the "granny annex ammendment" just made, if its less than a third of the value of the main house plus a few other hoops to jump through then no 3% extra.
I have a client selling main house and cottage nextdoor to same buyer we are having to structure the pricing to make the annex less than a third so £450 main house and £149,500 annexe.
Having done it and moved the in laws into an ex stable block that I converted at my house |I would happily pay the 3% to have them live elsewhere
I have a client selling main house and cottage nextdoor to same buyer we are having to structure the pricing to make the annex less than a third so £450 main house and £149,500 annexe.
Having done it and moved the in laws into an ex stable block that I converted at my house |I would happily pay the 3% to have them live elsewhere
I'm not surprised.
The value of any "fixtures and fittings" included in the agreed purchase price of a property has always been excluded from the value used for calculating Stamp Duty or SDLT. HMRC is very aware that people might be tempted to overstate the value of "extras" in order to reduce their SDLT bill.
I am pretty sure they will adopt the same approach if people are trying to move part of the sale price of an additional property into some other "exempt" category in order to try and escape some portion of the 3% additional tax charge..
The value of any "fixtures and fittings" included in the agreed purchase price of a property has always been excluded from the value used for calculating Stamp Duty or SDLT. HMRC is very aware that people might be tempted to overstate the value of "extras" in order to reduce their SDLT bill.
I am pretty sure they will adopt the same approach if people are trying to move part of the sale price of an additional property into some other "exempt" category in order to try and escape some portion of the 3% additional tax charge..
I was just about to start a thread on a similar theme, only because I have just been given the stamp duty figure for buying a second home.
The situation is that I own my house outright and live there with my fiancée, it is in my sole name. For a while we were considering buying another house and letting the current home out.
We thought about transferring the current home into my fiancée sole name, mainly to reduce the tax bill on any rental payments as I'm higher tax rate.
I've just spoken to an estate agent who informed me that if we were to buy the house we are considering, I would have to pay over £12k stamp as its a second home! Any mortgage on the new property would be in my sole name.
So, the question is, can we still transfer the current house to her and rent it, buy the new one in my name and legally avoid the extra stamp?
I'm thinking from the answers above...no.
The situation is that I own my house outright and live there with my fiancée, it is in my sole name. For a while we were considering buying another house and letting the current home out.
We thought about transferring the current home into my fiancée sole name, mainly to reduce the tax bill on any rental payments as I'm higher tax rate.
I've just spoken to an estate agent who informed me that if we were to buy the house we are considering, I would have to pay over £12k stamp as its a second home! Any mortgage on the new property would be in my sole name.
So, the question is, can we still transfer the current house to her and rent it, buy the new one in my name and legally avoid the extra stamp?
I'm thinking from the answers above...no.
Edited by Kwackersaki on Saturday 16th April 12:03
Eric Mc said:
Kwackersaki said:
Eric Mc said:
do you REALLY want to actually give away a sizeable asset to somebody FOR NOTHING?
Ha! Yes, I have considered this very carefully and I'm happy enough to take the risk. So, is it doable?At the end of the day it's my risk to take, I just want know if it's legal.
Kwackersaki said:
Eric Mc said:
Kwackersaki said:
Eric Mc said:
do you REALLY want to actually give away a sizeable asset to somebody FOR NOTHING?
Ha! Yes, I have considered this very carefully and I'm happy enough to take the risk. So, is it doable?At the end of the day it's my risk to take, I just want know if it's legal.
Anybody can more or less give anything they want to anybody else.
The issue is are there any tax implications arising or are there any other implications arising that could cause you problems later on.
From a tax point of view, transfers of land and property can give rise to Stamp Duty, Capital Gains Tax land even Inheritance Tax Liabilities , so it is right that you should be clear on whether you are creating a tax liability for yourself that you don't particularly want.
Stamp Duty would arise if there was any consideration between the two parties i.e. money or money's worth, over the IHT threshold. If you are gifting the property, that implies there is no consideration,so no IHT would arise.
Capital Gains Tax should not arise because the property you intend to give away for nothing is currently your main residence. A person's main residence is exempt from Capital Gains Tax. If it was NOT your main residence, you WOULD be liable to Capital Gains Tax based on the Market Value of the property at the date of transfer.
Inheritance Tax is more problematic. A transfer between spouses is completely IHT free. You are not currently married so you are currently not eligible for this exemption. Therefore, this transfer would become POTENTIALLY liable to IHT - but only if you died within seven years of making the gift. So you would have to make sure you don't get seriously ill or engage in any dangerous activities (like crossing the road or climbing ladders) for seven years after making the gift
And finally, for the gifting to work, it must be done absolutely above board and legally, with all the relevant authorities (the Land Registry) informed properly and the deeds modified accordingly. This procedure will more than likely require the involvement of solicitors which will, of course, cost.
Edited by Eric Mc on Saturday 16th April 17:23
Thank you Eric, very informative and useful as usual.
It would all be done legally as I've no wish to be subject to any HMRC investigation.
One thing that has just occurred that may cloud the issue is this.
The property was originally my mothers who gifted it to me several years ago. She passed away within 7 years and the market value of it came back into her estate during probate. The entire value of the estate was below the IHT so nothing to pay at that time.
My solicitor informed me that as she passed within the 7 years, should I sell the property at any time in the future, then capital gains tax will apply should there be a profit made on the selling price over the value of the house at the date it was gifted.
If so, if I gift the property to my fiancée, will I have to pay any capital gains even though no money is changing hands?.
Just to add, if the property is now my fiancées, and I then buy another house, it's not a second home from my point of view therefore normal stamp duty rates apply?
It would all be done legally as I've no wish to be subject to any HMRC investigation.
One thing that has just occurred that may cloud the issue is this.
The property was originally my mothers who gifted it to me several years ago. She passed away within 7 years and the market value of it came back into her estate during probate. The entire value of the estate was below the IHT so nothing to pay at that time.
My solicitor informed me that as she passed within the 7 years, should I sell the property at any time in the future, then capital gains tax will apply should there be a profit made on the selling price over the value of the house at the date it was gifted.
If so, if I gift the property to my fiancée, will I have to pay any capital gains even though no money is changing hands?.
Just to add, if the property is now my fiancées, and I then buy another house, it's not a second home from my point of view therefore normal stamp duty rates apply?
Edited by Kwackersaki on Saturday 16th April 19:17
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