1st Home 2nd Home - Advice

MrHutch

Hi,

I currently live with my partner in a house in Nottingham. She bought it with her father and the property is mortgage free. She owns 30% equity in the property with his father owning the other 70%.

We are thinking about buying another property, this time a small flat in Manchester, we want to have a base close to family. We are thinking of buying this property together. Both putting in 50%. The property will cost around 80k, and again, we hope to be mortgage free.

As she is already a registered owner of a property, would this class as a second home, bearing in mind she only owns 30% equity in the first property and will only own 50% of the new one?

How does it work, regarding stamp duty and capital gains, considering the new flat will be my first owned home but my partner's second?

Any information or pointers on this would be greatly appreciated, i'm just trying to get my head around everything.

Thanks!

AnotherJoe

It counts as a second home. No arguments.

Ways round it.
1. You buy it alone.
2. Possibly dodgy!! She gives her 30% to her dad as a birthday present, legally and above board, entry in land register etc. You buy new place together. Reverse the transaction, her dad gives her 30% of his house as an Xmas present.

Daniel54

AnotherJoe wrote: »

It counts as a second home. No arguments.

Ways round it.
2. Possibly dodgy!! She gives her 30% to her dad as a birthday present, legally and above board, entry in land register etc. You buy new place together. Reverse the transaction, her dad gives her 30% of his house as an Xmas present.

HMRC would most likely view these as linked transactions ( which they are).Furthermore they could deem the primary purpose as being to avoid tax ( which it is).

I think you are correct to call this dodgy and I suspect it would fall the wrong side of the difference between avoidance and evasion

Bossypants

As above.

My suggestion to avoid paying extra stamp duty would be for Dad to buy her out of her share before you two buy together (possibly getting a small mortgage if he can't afford it outright). As a bonus this would give her a bit more to spend on the flat with you, so you might be able to afford a bigger/nicer place (or she could just reinvest it elsewhere).

MrHutch

Thanks for the advice!

I have thought about buying it alone.

We aren't married (and i don't think we will get married) so if my partner wanted to give me a financial gift so i could buy the property, i assume that would be taxed?

AnotherJoe

MrHutch wrote: »

We aren't married (and i don't think we will get married) so if my partner wanted to give me a financial gift so i could buy the property, i assume that would be taxed?

Of course not. Gifts arent taxed (except if inheritance tax comes into it).