MSE News: Autumn Statement 2015: Stamp duty hike on buy-to-let and second homes

cascader

Hi I'd appreciate some clarification please. We own and live in our small 2 bedroom house with a tiny mortgage of £10,000 and are hoping to buy a new build to live in which is currently £320,000. The new build should be completed in August. So exactly what stamp duty would I pay? We are going to live in the new build and would probably let out our existing home we currently live in.

chris_m

According to;
http://www.bbc.co.uk/news/business-34922738

3% on the first £125K, 5% on the next £125K and 8% on the remaining £70K

_CC_

cascader wrote: »

Hi I'd appreciate some clarification please. We own and live in our small 2 bedroom house with a tiny mortgage of £10,000 and are hoping to buy a new build to live in which is currently £320,000. The new build should be completed in August. So exactly what stamp duty would I pay? We are going to live in the new build and would probably let out our existing home we currently live in.

You'll have to wait for the details, but it potentially looks like a bill of £15,600

Merry Christmas :beer:

AdrianC

_CC_ wrote: »

You'll have to wait for the details, but it potentially looks like a bill of £15,600

vs £6k if you sell your existing property.

So that's £9.600 to factor in to your calculations as to whether THAT property is right as a BtL.

Let's say your existing house is worth £160,000. If you sell that one, buy the newbuild, you save £9,600 SDLT. If you then buy a different £160k property, you would pay £5,500 SDLT on it - so a saving of £4,100 less the difference in fees, and you stand a strong chance of selecting a more lettable property.

Theatre

Do we know what definition of a second home will be? What criteria will be used ?
Clearly there is a huge difference between buying your new home before you have managed to sell your current home and buying another house intending to keep both for whatever purpose.
I was intending to make an offer on a new home and have not yet got my current one on the market so this potentially has a significant effect upon me. It may mean I have to simply back off and form a chain.

martinsurrey

AdrianC wrote: »

vs £6k if you sell your existing property.

So that's £9.600 to factor in to your calculations as to whether THAT property is right as a BtL.

Let's say your existing house is worth £160,000. If you sell that one, buy the newbuild, you save £9,600 SDLT. If you then buy a different £160k property, you would pay £5,500 SDLT on it - so a saving of £4,100 less the difference in fees, and you stand a strong chance of selecting a more lettable property.

or an even better idea would be to sell the old house,

Get the smallest mortgage possible on the new build (while retaining enough deposit for the next step),

Set up a Ltd co, get a director guarantee backed BTL mortgage in the ltd company to buy a £160k house, pay £700 stamp duty in the company, and be able to offset all of the mortgage interest in the company against the rent for tax, instead of it being on the new build which is not tax deductible.

You can then extract the profit in the Ltd via your £5k tax free dividend allowance, after paying corp tax at only 18-20%.

AndyBSG

Theatre wrote: »

Do we know what definition of a second home will be? What criteria will be used ?

Not sure that we do at the moment, guessing the government haven't even considered the administration or eligibility side of it.

For example, in Cascaders's situation he will currently pay almost 16k.

However, if he get's the existing property transferred into his wife's name and buys the new property in his name then i'm assuming that is a way around it.

It also seems there are still discussions on corporations and those owning 15 or more properties getting an exemption... Which seems madness as surely it will now just encourage those with a dozen properties to try and rush through 3 purchases before it kicks in.

Also, I really don't see this fixing the BTL problem and all I can see is it pushing rents up as LL's try to recoup the extra cost.

All it will really penalise is those in the middle class who buy one additional property as an alternative to a pension and be nothing more than an inconvenience and excuse to push up rents for the real multi property LL's

Pixie5740

Married couples can only have 1 main residence.

satchef1

Doesn't seem like it will make a huge difference in much of the country, but it does improve the chances of FTB competing for cheap property.

A property I'd placed an offer on was snapped up at asking price by a BTL landlord. Under the new rules, he would have had another £4200 to pay. Potentially, that could mean he'd have to lower his bid, giving me a better chance of beating his offer.

At the same time, £4200 isn't a massive amount of money if you're looking at property as an investment. The value should increase by at least that in the first year, so maybe the BTL LL would just take it on the chin?

satchef1

cascader wrote: »

Hi I'd appreciate some clarification please. We own and live in our small 2 bedroom house with a tiny mortgage of £10,000 and are hoping to buy a new build to live in which is currently £320,000. The new build should be completed in August. So exactly what stamp duty would I pay? We are going to live in the new build and would probably let out our existing home we currently live in.

One of the government's objectives here is to try and encourage people like yourself to place the old home back on the market. They'd really rather you didn't keep it to rent out.

TBH I'd be surprised if there isn't more to come. They'll be watching to see what effect the SDLT and BTL mortgage tax relief changes have on the market, and could go further if need be.