Stamp Duty on Residential and claiming tax relief on BTL

[Rameez-v57b3]

Have a question that my current accountant has requested i seek specialist advice as they don't deal with property much. Basically deal with IT consultant and provide online software for accounting.

I currently own a BTL and will purchase another property which i am looking to make my main residence.

I'll be paying additional stamp duty due to being a homeowner already, now my question is is 2 parts:

If i let the property out for a short term and then move into it, will i be able to claim tax relief as costs towards my BTL operation?

If i don't rent it out and move into it, will i be able to claim the stamp duty paid against my tax bill?


Advice much appreciated!

[Alpinestars]

1. What costs? Living in the property and then letting it doesn’t preclude you from offsetting costs you can normally offset against rental income.

2. You can’t claim the stamp back as you won’t be replacing your main residence with another main residence.

[Rameez-v57b3]

Alpinestars said:

1. What costs? Living in the property and then letting it doesn’t preclude you from offsetting costs you can normally offset against rental income.

2. You can’t claim the stamp back as you won’t be replacing your main residence with another main residence.

Considering the extra stamp will amount to close to 5 figures, this could be a substantial saving so i'm tryng to understand options.

If it's bought as an addition to my BTL operation i should be able to claim back all associated costs, stamp duty, legal fees & product fees if applicable.

If it's used as main residence i can't.

As a middle ground can i partially rent it for a duration then look to use it as a main residence.

[Alpinestars]

Rameez-v57b3 said:

Considering the extra stamp will amount to close to 5 figures, this could be a substantial saving so i'm tryng to understand options.

If it's bought as an addition to my BTL operation i should be able to claim back all associated costs, stamp duty, legal fees & product fees if applicable.

If it's used as main residence i can't.

As a middle ground can i partially rent it for a duration then look to use it as a main residence.

You can’t claim back the costs you’ve mentioned. They are added to the cost of the property and deducted from the sale price when you eventually sell it, reducing the capital gain.

Letting for a small period doesn’t work. It’s still a BTL.

[Rameez-v57b3]

Alpinestars said:

You can’t claim back the costs you’ve mentioned. They are added to the cost of the property and deducted from the sale price when you eventually sell it, reducing the capital gain.

Letting for a small period doesn’t work. It’s still a BTL.

When buying my first property i was able to claim legal costs for my property to offset against rental income?

So if letting for a small period surely i should be able to follow the prior way where i can say for example occurring making 12k rental income and offsetting 10k stamp duty + legal fees which should equate to me paying tax on the 2k only?

[Alpinestars]

Rameez-v57b3 said:

When buying my first property i was able to claim legal costs for my property to offset against rental income?

So if letting for a small period surely i should be able to follow the prior way where i can say for example occurring making 12k rental income and offsetting 10k stamp duty + legal fees which should equate to me paying tax on the 2k only?

You cannot, and should not, have claimed fees in connection with your purchase against rental income. If you’ve done it, it’s because you’ve either got away with it, or your return has not been looked at (yet) by HMRC.

You can NEVER claim stamp costs against income.

[cailean]

Purchase costs are part of the consideration paid (so deducted on sale - CGT), not operating costs of running the property/business (income tax).

[Jockman]

Alpinestars said:

You cannot, and should not, have claimed fees in connection with your purchase against rental income. If you’ve done it, it’s because you’ve either got away with it, or your return has not been looked at (yet) by HMRC.

You can NEVER claim stamp costs against income.

I wouldn't argue with this.

Football aside, Alpinestars knows his stuff !!!!

[Rameez-v57b3]

Alpinestars said:

You cannot, and should not, have claimed fees in connection with your purchase against rental income. If you’ve done it, it’s because you’ve either got away with it, or your return has not been looked at (yet) by HMRC.

You can NEVER claim stamp costs against income.

Thanks for clarifiying this, didn't know this was the case and was not advised by accountants! I assume i should continue operating as normal.

So for a second property with the first being BTL would they second qualify as a main residence and not be subject to CGT on sale or would i still be subject to the BTL rules?

cailean said:

Purchase costs are part of the consideration paid (so deducted on sale - CGT), not operating costs of running the property/business (income tax).

Thanks for the info! Bit dissapointed now the accountants didn't notify me of this although their specialism is in accounting for IT contractors

[Alpinestars]

Rameez-v57b3 said:

Alpinestars said:

You cannot, and should not, have claimed fees in connection with your purchase against rental income. If you’ve done it, it’s because you’ve either got away with it, or your return has not been looked at (yet) by HMRC.

You can NEVER claim stamp costs against income.

Thanks for clarifiying this, didn't know this was the case and was not advised by accountants! I assume i should continue operating as normal.

So for a second property with the first being BTL would they second qualify as a main residence and not be subject to CGT on sale or would i still be subject to the BTL rules?

cailean said:

Purchase costs are part of the consideration paid (so deducted on sale - CGT), not operating costs of running the property/business (income tax).

Thanks for the info! Bit dissapointed now the accountants didn't notify me of this although their specialism is in accounting for IT contractors

If the second property is your main residence, you will benefit from the CGT exemption. Doesn’t matter that you have other properties that are BTL. Even if you BTL the second property for a short time, and then use it as your main residence, it will still qualify for the exemption (but the gain is time apportioned, with the gain on letting being taxable).

[Alpinestars]

Jockman said:

I wouldn't argue with this.

Football aside, Alpinestars knows his stuff !!!!

, but I’d say I know more about football than tax .

[Rameez-v57b3]

Alpinestars said:

If the second property is your main residence, you will benefit from the CGT exemption. Doesn’t matter that you have other properties that are BTL. Even if you BTL the second property for a short time, and then use it as your main residence, it will still qualify for the exemption (but the gain is time apportioned, with the gain on letting being taxable).

Much appreciated for the advice i looked into the CGT and having a property as a main residence and if it was rented for a short period you can claim partial relief. Fully understand it now.

Thanks!

[Alpinestars]

Rameez-v57b3 said:

Much appreciated for the advice i looked into the CGT and having a property as a main residence and if it was rented for a short period you can claim partial relief. Fully understand it now.

Thanks!

Yes. Up until April next year you can also get relief for some or all of the period the property is let (letting relief), but it’s being severely limited from April 2020 - so effectively you’ll have a taxable gain in respect of the let period.