Stamp Duty Payable On Gifted Property

2ran

Ok so if i've understood correctly now stamp duty is payable at the higher rate as its a second property but it will be on the amount of the mortgage I take over rather than the value. Which means that its best for her to lower it by as much as she can before gifting it to me?

booksurr

2ran wrote: »

Ok so if i've understood correctly now stamp duty is payable at the higher rate as its a second property but it will be on the amount of the mortgage I take over rather than the value. Which means that its best for her to lower it by as much as she can before gifting it to me?

NO. you have been told several times YOU CANNOT TAKE OVER a mortgage

I will try one last time to break it down into simple steps as you are obviously struggling to understand what we tell you:

1. if your mother gives the property to you she will have to pay Capital Gains Tax

2. in order to change ownership into your name her mortgage will have to be repaid in full. She cannot "transfer" it to you

3. if mother can pay off her mortgage using her own money that is great. She can then give you the unencumbered property without any stamp duty implications (CGT as per 1 above still applies)

4. if mother cannot pay off her mortgage using her own money you will need to buy the property from her using either your own cash or by getting a mortgage in your own name

5. if you need to pay mother more than £40,000 you will need to also pay stamp duty at the higher rate on the whole amount you pay her since you are buying an additional property

2ran

When I say take over the mortgage I mean go and apply to the bank for a mortagge for the same amount minus a deposit they would probably ask me to put down. I don't mean literally taking over the mortgage.

Thrugelmir

2ran wrote: »

When I say take over the mortgage I mean go and apply to the bank for a mortagge for the same amount minus a deposit they would probably ask me to put down. I don't mean literally taking over the mortgage.

How is your mother going to settle the potential CGT liability though. If no cash passes hands.

xylophone

Had you thought of selling your flat and buying the house with the proceeds, a mortgage if necessary and the gifted deposit?

Your mother would still have to consider CGT.

AnotherJoe

booksurr wrote: »

However, OP is apparently unable to understand that SDLT is based on the consideration paid and so in the case of him having to get a mortgage to pay off mother's mortgage it is indeed related to the size of his (new) mortgage as that is how much he will be paying mother to buy her out of the property

Yes but in this case thats just a coincidence, and the fundamental fact is that SDLT is not related to the size of the mortgage you take out on property, which appears to be his misconception.

For example he's talked about adding a deposit of his own (not actually necessary in this case), but lets say he adds a £20k deposit, and the mother had a £120k mortgage, SDLT would be due on the £120k and not the size of his mortgage (£100k). Or, if mother had no mortgage but sold it him for £100k and he got £80k mortgage as he has £20k saved, the SDLT would be based on £100k and no ones mortgage.

Richey_

£22,000 stamp duty on a £400,000 second home........

westernpromise

booksurr wrote: »

However, OP is apparently unable to understand that SDLT is based on the consideration paid

So does that mean that if I buy a £500k property and give it to my daughter instantly, there'll be no SDLT payable on that transfer? I can give houses away?

gingercordial

westernpromise wrote: »

So does that mean that if I buy a £500k property and give it to my daughter instantly, there'll be no SDLT payable on that transfer? I can give houses away?

Correct.

You buy the house for £500k in cash, no mortgage. You pay SDLT yourself on £500k.

You give it to your daughter the next day for nothing. There is no consideration paid by her and so no second SDLT charge to pay.

Capital gains tax would be in point for you but assuming the house has not gone up in value between your purchase on day 1 and your gift to your daughter on day 2 your tax bill will be nil.

Inheritance tax might be an issue if you die within seven years of doing this.

In essence this works out exactly the same as if you'd handed your daughter £500k in cash and told her to buy a house with it (albeit these days that might be cheaper on the assumption that you probably had to pay the extra 3% SDLT on your purchase of what was to you a second home, but she wouldn't).

The above all becomes more complicated if the house is bought by the parent on a mortgage which the child is "taking over", as in this thread, or if there's a gap between the purchase and gift during with a gain might arise if the value of the property increases.

Buiomega

Hello
I have an interesting case to share.
I purchased a freehold property in my own name In June 2016. Whilst there are three flats in the property (with PP granted many years ago), no lease has ever been issued.
As it was an investment property, I paid increased SDLT on purchase. I also have a mortgage on the whole freehold property for about 35% of its value.
As we plan to renovate in stages (flat by flat) and then sell the individual units, I was thinking of issuing new leases to myself and my wife (I would gift her a share in the lease) and releasing equity from the flats (with new BTL mortgages) to repay the original mortgage and fund the expenses.
Now, am I correct in thinking that if the original mortgage is paid off with the money from the new BTL mortgage, there's no ongoing mortgage liability being born by my wife, there's no consideration, and her joint interest in new lease can be treated as a gift from me, without triggering any SDLT at all?

Comments welcome!