Multi-House & second home Stamp Duty largesse

[PushedDover]

I am looking at some planning for the next 18 months or so to mitigate or sensibly manage what is a likely reaming.

Wife and I currently live in a rented property. Registered address.
This has been for 4 years.

House A:
Prior to marriage / getting together wife bought and owned her own property outright in her name only. She has lived in it for c.5Y, butIt has been rented out to tenant(s) for the last 4 years. (i.e. Owned total of 9 years) Value c. £300k.

House B:
Prior to marriage I bought a house that is AirBnb'd (small business rates) Value c. £250k
Owned for 4 years, never been my residential address.

Both have mortgages, wash their faces on income, investment in bricks.

It is likely that in 12 to 18 months through some success at work, we will be able to buy a main residence of c. £1m for cash / ease.
This is House C.


This as far as I can see will mean the main residence will be subject to second home
It has crossed my mind that this will be at second home stamp duty rates - correct?

The wifes house A we would likely sell up (as a hassle to manage from a distance)
I assume that we should try to do this before House C purchase?

House B we are not precious about, but if possible would rather not sell, and either gift it to my daughter / trust as she is only 13 ! or rent out (not AirBnB)

is there advise anyone can give on the above how to not get so stung on House C Stamp Duty?

(I am, as you can see, a bit inexperienced in all this!)

[CharlesElliott]

If you own an additional property (B) then you will pay the additional 5% SDLT. If you sold B first, and are only replacing your main property (A), then you don't pay the 5% surcharge if you sell it before you buy C, or within 36 months of buying C.

Be very careful about gifting a property. You will need to convince HMRC that you really have gifted it and no longer have any benefit from it, otherwise it will be seen as a gift with reservation and you will still be viewed as 'owning' it for a number of tax considerations.You will also remove any first time buyer benefits from your daughter in the future.

[PushedDover]

Thank you Charles, good advise on both parts.

If I wanted to sell A, but not B, is there a way to avoid C having second home stamp duty ?

[CharlesElliott]

You would have to make B your primary residence. There is no strict 'test' as such for that (see https://www.gov.uk/hmrc-internal-manuals/capital-g... but it would realistically mean living in the property for a decent amount of time, having all your bills etc. registered there, registered to vote etc.

Bear in mind that you will be liable to pay CGT on a residence that is not your primary residence when you dispose of it (and even if you gift it....).

Charles

[TownIdiot]

PushedDover said:

Thank you Charles, good advise on both parts.

If I wanted to sell A, but not B, is there a way to avoid C having second home stamp duty ?

Not legally, no.

[CorradoTDI]

CharlesElliott said:

If you own an additional property (B) then you will pay the additional 5% SDLT. If you sold B first, and are only replacing your main property (A), then you don't pay the 5% surcharge if you sell it before you buy C, or within 36 months of buying C.

Be very careful about gifting a property. You will need to convince HMRC that you really have gifted it and no longer have any benefit from it, otherwise it will be seen as a gift with reservation and you will still be viewed as 'owning' it for a number of tax considerations.You will also remove any first time buyer benefits from your daughter in the future.

I thought you only paid the additional if one of the existing properties was your main residence and in this case it's not?? It's not particularly clear from the below...

https://www.gov.uk/stamp-duty-land-tax/residential...

[CharlesElliott]

CorradoTDI said:

I thought you only paid the additional if one of the existing properties was your main residence and in this case it's not?? It's not particularly clear from the below...

https://www.gov.uk/stamp-duty-land-tax/residential...

In this case, as you are not replacing your main residence (as it is rented), I believe you will be liable for the higher rate. The reduction is effectively a 'relief' for replacing your primary residence - which doesn't apply here.

[skyebear]

I'm a bit fuzzy around the main residence rules in your case, however if you were to be hit with the additional SDLT, should you dispose of your other property(ies) within three years you can reclaim the additional SDLT.

When selling the rented property(ies) you can deduct the time you lived there plus nine months from the applicable period for CGT. So if you owned it nine years, lived there for four and rented it the remainder, the CGT calculation would be for the increase in value over a period of four years & three months.

[Mr Pointy]

Get divorced
One of you moves in to A
A buys new house C
Move out of A into C
Sell A - claim CGT relief as appropriate
Claim back excess Stamp Duty on C
A moves out of B into C
Get married again
Sell or rent out B

[PushedDover]

Mr Pointy said:

Get divorced
One of you moves in to A
A buys new house C
Move out of A into C
Sell A - claim CGT relief as appropriate
Claim back excess Stamp Duty on C
A moves out of B into C
Get married again
Sell or rent out B

Seems perfectly straight forward. Will approach the OH with the step by step's

Edited by PushedDover on Tuesday 7th January 11:21

[PushedDover]

It would appear that the best course of action would be to sell both properties A & B before buying C.

So in reality, perhaps worth thinking about sooner than later and investing the money to accrual at a better rate than bricks?

[TownIdiot]

PushedDover said:

It would appear that the best course of action would be to sell both properties A & B before buying C.

So in reality, perhaps worth thinking about sooner than later and investing the money to accrual at a better rate than bricks?

I'd agree with this.

House B is an investment so I'd be working out the returns

If you sell you'd have CGT and a lump of cash.
You'd be saving a consider ale amount of SDLT

Work out what this adds up to and go from there.

[PushedDover]

Back again - and thanks all for the comments and advice.

Can I ask, would it the conundrum make any difference if :

House A : was solely owned by now Wife, and registered address for many years, before our current rented residence / registered address. i.e It WAS maind address, but not any more / surplus.

Also, only my name on the rental agreement of the current rental property not my wife, although both now have it as reegistered address for banking / voting etc.

House B : is a 'small business' from the local authorities / council tax bandings.



I am pretty certain that the above makes no difference, but checking before bigger decisions etc. Thanks

[CharlesElliott]

The question in the eyes of HMRC, was whether House A was her primary residence. Assuming she did not nominate this property as her primary residence formally, then it would be on the evidence of what actually happened in reality. If it was her primary residence for some / all of the time then that will allow reductions in CGT.

If you are buying the new house as joint purchasers, then it doesn't matter if only one of you owns a second property, as it is deemed that your 'unit' has a second property.

Wtih respect to SDLT, my view is that as neither of you are replacing your primary residence (which is the rented property), you are not eligible for the reduced SDLT rate.

You should take expert advice here.

[PushedDover]

Yes - appreciated and looking to source some Professional advice locally
Unfortunately my Accountant over the years and up to speed on this has retired.
She may give some advice for Majestic Vouchers