The economy and the autumn statement

CLAPTON

cells wrote: »

really?

how does it work then.

If mr dead purchased a house for £100k and it was £200k on his death and assuming his is wealthy enough to fall in to the inheritance tax.

I thought first they chop off CGT (so £28k of the £100k gain) and then inheritance tax of 40% for the remaining £72k to leave Mr dead estate with £43,200 of the £100,000 gain.

in this example

cgt = 0 for any gain or any size estate as there is no cgt on death

IHT is charged on the amount over 325,000 (or 650,000 if the estate can use the spouses' IHT allowance) at 40%
after April 2016 there is an additional allowance for the family home so may make 1,000,000 IHT free

setmefree2

Secondly, property investors still have a trick left up their sleeves.
When it comes to selling up, they can offset purchase costs against any eventual capital gains tax – and that includes stamp duty.
So, while they will get whacked with a big bill now, if a buy-to-letter eventually sells at a tasty profit, they can claim stamp duty back later on CGT.
The Treasury confirmed to me last night that this still remains the case. The question is, will it one day face the axe?

http://www.thisismoney.co.uk/money/buytolet/article-3333949/The-buy-let-stamp-duty-tax-trick-landlords-sleeve.html

Initially, that 3 per cent doesn’t sound like much, but in fact it almost trebles the stamp duty bill on a £275,000 buy-to-let from £3,750 to £10,800.
Remember, this comes on top of landlords soon losing the ability to offset all their mortgage interest against tax on rental income.
Overall, these moves start to make buy-to-let look less attractive for those thinking of piling in

Thrugelmir

wymondham wrote: »

Did they do anything to help people downsize to free up bigger homes?

Why should people expect any help?

seven-day-weekend

We are buying a flat to rent out (completion before Christmas so won't attract any Stamp Duty, it is only £85k).

The flat was on the market for six months before the price was dropped and we got it at 85k. Plenty of time for OOs to buy it if that is what they wanted to do.

For us, it's a home for our money and a supplementary income to our pensions, also an investment for our son when we shuffle off this mortal coil.

For our prospective tenant, it's a new (two years old) home with good transport links and a reasonable rent on a new development.

Why is this a problem?

ETA: We intend to pay all taxes due.

CLAPTON

what exactly is a second home?

seven-day-weekend

CLAPTON wrote: »

what exactly is a second home?

I assumed a second home was one you lived in nearly as much as your main home, whereas a holiday home is one you only live in for a few weeks a year.

When we were doing six months in Spain and six months in the UK, I always thought of the Spanish house as my second home.

A second home could also be one that you live in in the week, to avoid commuting costs, whilst the main family home is elsewhere.
(Like a lot of MPs do in fact).

CLAPTON

seven-day-weekend wrote: »

I assumed a second home was one you lived in nearly as much as your main home, whereas a holiday home is one you only live in for a few weeks a year.

When we were doing six months in Spain and six months in the UK, I always thought of the Spanish house as my second home.

A second home could also be one that you live in in the week, to avoid commuting costs, whilst the main family home is elsewhere.
(Like a lot of MPs do in fact).

I was thinking of what constitutes a second home for the purpose of the stamp duty tax.

ChopperST

I live in Northern England and personally am not a landlord, preferring more passive investments for mine and my families futures. However I have many friends who are invested in property. The bulk of them will buy old terraced houses and do them up themselves to add value. New kitchen, bathroom, general modernising etc.

These sort of properties can easily be bought under the £125k 0% threshold. With the additional 3% factored in that would add £3k to the purchase price. That works out at an extra £150 a year if you were to buy and hold the property over a 20 year period. Easily absorbed by someone who has a sensible business model and isn't leveraged too high on LTV, looking long term, HPI will decrease the burden of the initial charge still further the longer the house is owned.

Obviously in London and the SE the purchase prices and basic stamp duty rates are higher but this change may well see many London-Centric LL's simply investing in property elsewhere and buying multiple properties under the £125k threshold rather than one more expensive property down South.

Rather than solving the supply and demand problem, Osbourne may have just shifted its focus.

lisyloo

Why should people expect any help?

No-one said anyone was expecting help.
It's other people that want their homes, so there are two options - carrot or stick. Trying to chuck old people out of their homes (stick) doesn't generally go down too well.

what exactly is a second home?

Isn't it the one you haven't designated as your PPR?

antrobus

CLAPTON wrote: »

I was thinking of what constitutes a second home for the purpose of the stamp duty tax.

Presumably we shall have to wait until HMG publishes the detailed bill/draft regulations. But the official announcement speaks of increasing SDLT "purchases of additional residential properties (above £40,000), such as buy to let properties and second homes". I'd therefore guess that you will be charged for the extra SDLT unless you can show that it is the only property that you own.