Buying for a family member

freedomby30

Hi all. A family member has found themselves in an awful situation. They currently rent and have taken on a new job that is classed as self employed. Round here to buy or rent you must have 3 years worth of accounts. Unfortunately he hasnt even been in the job a year and his current landlord is selling up. Long story short we are looking to buy a second property for him to live in. I just want some advise on the long term. If we sold this place once he is back on his feet will we have to pay capital gains tax on it? The property is valued at 80k but hoping a slightly less offer will be accepted. Many thanks

elleJay42

Short answer is yes.

If you currently own a property and buy a second you will have to pay CGT regardless of what you're doing with it as far as I'm aware

Bluebirdman_of_Alcathays

If you already own a property, you will attract the 3% extra SDLT as well - £2400 on an 80k purchase.

marliepanda

And don't forget your additional stamp duty on a second property.

Plus you will be a landlord, whether you like it or not, and will have all of the usual landlord obligations (gas cert, etc) and have to pay tax on the income less allowable expenses.

freedomby30

Thankyou!

Have figured in 2400 stamp duty, 760.32 solicitors fees which includes searches etc (got quote this morning) 35 transfer fee and 250 for the survey. then obv. deposit and mortgage payments (no arrangement fee) am i missing anything else?

Also any idea what the capital gains tax would be? Unlikely we will sell in the future as i have siblings and children who would make use of the property in the future or could make it a btl if i really wanted to. I dont really understand capital gains tax, someone mentioned it but didnt understand it themselves. Although i have no intention to sell it i dont want to "buy it blind" if you see what I mean.

Bluebirdman_of_Alcathays

Capital gains is a tax on the gain in value. So the sale price, less the purchase price. You can also deduct selling costs, and there are various reliefs available. Everyone also has an annul allowance (currently £11100) below which no CGT is due.


In essence, unless the property makes a whacking great gain, no CGT will be due. 80k sounds like it's in a part of the country that isn't rising massively. Finally, you will never be financially worse off, even if there was a taxable gain of 100k, you would still only pay 18-28k tax, and you would have sold for close to 200k.

elleJay42

There's a gov.uk site that's got some good information. CGT is based on a lot of different factors like how much tax you pay and how much you have gained from the property so I don't think anyone can give you a ball park figure but hopefully someone else will be able to help

Gigervamp

freedomby30 wrote: »

Unlikely we will sell in the future as i have siblings and children who would make use of the property in the future or could make it a btl if i really wanted to.

Erm, it will have to be a BTL anyway as you're buying it to let to someone else.

marksoton

freedomby30 wrote: »

Round here to buy or rent you must have 3 years worth of accounts.

Round where?

What you propose has many possible legal/financial hurdles...

DigForVictory

Can you get a mortgage for a property you intend to let to a family member?
I thought BTL mortgages were pretty compartmentalised about that sort of tenant.

xylophone

Would he be able to rent if you acted as guarantor?