Buying new house & letting current -impact of new buy to let changes -help

londonmania

I bought a London Flat in 2007 to live in. It is mortgaged (about 70% paid off based on todays valuation) and I have a DIP from current lender to rent it out on buy-to-let mortgage as I am now looking to move into a bigger property with my partner.

My partner (first time buyer) and I have put in an offer for a house and are in the searches stages of the process. We are hoping to complete by May 2016.

Once done, I will need to rent out my flat.

I would like to understand how the new rules around buy to let and second homes is likely to impact on both properties.

As the new House will be our main residence - will we have to pay higher stamp duty on it than we do today if completion is After 1st April? is it classed as a second home? I hope not.

Since I already have the flat that I intend to rent out I assume it will not get hit with any additional stamp duty either (I already paid it in 2007)? I realise in 2 years I wont be able to claim mortgage interest relief on the rental income from the flat but are there any other outgoings/tax/charges I need to be aware of?

Thanks for any advise.

anselld

Your new place will attract the 3% second home surcharge if you complete after 1st April.

londonmania wrote: »

Once done, I will need to rent out my flat.

You don't need to rent it, you could sell it. That is the purpose of the legislation to encourage you to do so.

londonmania

I read a post on msn money that second homes if main residences will be exempt. How can one be sure? Any particular website that helps provied more details ?

thanks for the tip, but I want to keep it for Rental Income as its in a good location with decent rental yield.

anselld

londonmania wrote: »

I read a post on msn money that second homes if main residences will be exempt. How can one be sure? Any particular website that helps provied more details ?

thanks for the tip, but I want to keep it for Rental Income as its in a good location with decent rental yield.

https://www.gov.uk/government/consultations/consultation-on-higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties/higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties

franklee

This explains it fairly well bearing in mind the consultation isn't finished yet:

http://www.zoopla.co.uk/discover/buying/q-a-new-3-stamp-duty-surcharges/#Vpt3wa3doLGqyA9f.97

See the flowchart:



See also the Q&A What if I already own a property, but am buying with a partner who doesn’t?

p00hsticks

londonmania wrote: »

I read a post on msn money that second homes if main residences will be exempt. How can one be sure?

I think you will be liable to the extra tax in the circumstances you describe - see the flowchart in the consultation document here

https://www.gov.uk/government/consultations/consultation-on-higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties/higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties


The wording in the Autumn statement was that the extra 3% SDLT would be payable on "additional" homes. my understanding is that it doesn't make a difference as to the purpose of that "additional" home - whether it's a BTL, a holiday home or a main residence. If you end up with more homes at the end of the process than you had at the start then you're liable.

After all, if new purchases of residential homes without selling existing properties was exempt, people could still build up large BTL portfolios without paying the extra tax simply by making each new purchase their residence for a short period of time before moving on to the next - a major loophole which would go against the main intention of the proposed legislation.

alchemist.1

You're paying the extra 3% stamp duty. It was designed for people like you.