Buying a 2nd property - new 2016 Stamp Duty rules

polacoloco

Hi,

I need some help with finding a way to buy a house but minimizing a wooping 18k in Stamp Duty Tax.
I have bought a single bed apartment over 2 years ago. Since then I have found a partner and we are thinking of moving in together. I have rented out my flat as it is too small for us both and in the meantime we have rented a house which we live in.
It is clear to me that paying 1300 a month in rent is a waste of money and it would make sense to pay that as a mortgage installments instead.

After talking to my broker I have realized then now I would be hit with the higher Stamp Duty which would be 3% for the first 125k then 5% for the following 125% and 8% for everything above 250k. I m not planning on buying a property worth more than 350k (that equates to 18k in SDT)

The issues I have:
1. the flat still isnt on a buy to let mortgage but treated as my living address - I suspect I need to change that ASAP
2. I would like to keep that property as it generates a positive cashflow so selling to a 3rd party wouldnt be ideal
3. I could sell it to my LTD company (but I am not sure how would that work - i suspect the company would have to take a mortgage itself and from researching that 3 years ago the deposit was about 40% back then?) The company has a renting properties profile apart from my main one already as I am renting on a minimal scale
4. I think selling it to my company under some reasonable deal would free me from the increased Stamp Duty on the new property as it would make me as a person buying a property as a primary residence
5. On the other hand I suspect company would have to pay its own Stamp Duty - the flat was worth 129k when i bought it so market value now around 140k i recon - i would lower the value possibly and sell at a loss at 124.999? and hopefully pay no tax as my limited company is buying the 1st property or pay 3% only? I wouldnt mind having the company paying the mortgage but if there is a need for personal guarantee than i could give it but i recon then it would influence my credit capabilities and score for my new mortgage.
6. My partner doesnt have a property at all but she doesnt have a deposit either. My broker was indicating to me that even if we bought it together which i would like to do it would still fall under 2nd property and the increased Stamp Duty Tax as I already have a flat.
7. Buying a property with my partner would I assume increase our credit capabilities and make it more appealing to the landers - we would have sign some sort of paperwork stating that all the deposit is mine but the mortgage payments are a responsibility of both of us.

The interesting points would be if my company while owing the flat can take for example amortization from it and treat mortgage payments as cost? if so then even paying the stamp duty tax now would in the long run work out in my advantage. Unless of course there is some other tax i would have to pay which I am not aware of.

Apologies my knowledge of UK taxation system is so poor but all I am trying to do here is come up with the solution so i can buy a house with my better half. If i have to pay the increased stamp duty tax then having in mind my future property would be at 350k i would need to have 18k more in just SDT on top of the deposit which makes the whole purchase out of our reach.

If you know the resolutions to the above or have ideas that could help me then please share. Alternatively if you could recommend a good broker or a book about it if there is one it would be great.
The company i consider using as a purchaser of my flat is operating since 2010

thank you in advance
Jakub

kinger101

If you transfer your property to a company, it will be deemed to have occurred at it's open-market value rather than a figure of your choosing. And the 3% surcharge applies to companies even it's the companies first and only property. One individuals have access to the first-purchase standard rates.

marliepanda

You can't avoid it.

It's there entirely to put off people like you

kinger101

Just to add - based on what you've posted above, I'd recommend an accountant does your personal tax returns for this year. Deadline for filling is 31 January.

The easy solution is to sell the property you no longer require.

gingercordial

polacoloco wrote: »

Hi,

The issues I have:
1. the flat still isnt on a buy to let mortgage but treated as my living address - I suspect I need to change that ASAP


Apologies my knowledge of UK taxation system is so poor

Yes you have to sort that out with your mortgage lender. They may take a dim view.

Have you been complying with all your other legal duties as a landlord?

Have you been declaring the rental income to HMRC, if your knowledge of UK tax law is "so poor"?

polacoloco

Hi thank you for your replies. Yes I have an accountant and I do declare my rental income.
I will keep looking maybe there is a way but still selling it to the company and paying full SDT would make me not own a property.
I need a meeting with the broker/accountant and decide then.
thank you again for the advise.

polacoloco

:beer: I get what you say but the more i think about it the more it looks like it:
1. wont stop the big portfolio owners - as they have enough passive income to continue growing and the hit they ll take wont be as big as on an individual as me
2. it will prevent people from trying to build what for years was available eg. have your own home and a bit of extra income from having lets say 2 or 3 flats - that could pay for your hols once a year :rotfl:

Time to try to save 18k for the SDT

kilby_007

polacoloco wrote: »

:beer: I get what you say but the more i think about it the more it looks like it:
1. wont stop the big portfolio owners - as they have enough passive income to continue growing and the hit they ll take wont be as big as on an individual as me
2. it will prevent people from trying to build what for years was available eg. have your own home and a bit of extra income from having lets say 2 or 3 flats - that could pay for your hols once a year :rotfl:

Time to try to save 18k for the SDT

Why do you think Fergus Wilson, the UK's biggest landlord (in terms of number of properties owned, not physical size!) is selling off all of his BTLs? He's quitting the game. It's not just stamp duty, the whole taxation system for landlords will be changing quite drastically.

AnotherJoe

It would likely be cheaper to sell the small flat, buy the new house, then buy another small flat or maybe a bigger one (with more income potential)later. Is there anything special about this one?

Otherwise, how many years rental profit will it take to recoup the £18k? Most likely 5 to 10? All that hassle work and expense in the hope of a capital gain on a small flat (so not much most likely)

Is it worth it? Have you done the maths to see if you will actually be making money

MyOnlyPost

kilby_007 wrote: »

Why do you think Fergus Wilson, the UK's biggest landlord (in terms of number of properties owned, not physical size!) is selling off all of his BTLs? He's quitting the game. It's not just stamp duty, the whole taxation system for landlords will be changing quite drastically.

Surely the UK's biggest landlord is incorporated and therefore continues as normal and is not affected by the new tax regime?

Bob_Bank_Spanker_2

MyOnlyPost wrote: »

Surely the UK's biggest landlord is incorporated and therefore continues as normal and is not affected by the new tax regime?

No - he is not incorporated. It would have been, and remains, very financially disadvantageous to incorporate - indeed it looks like only about £10k of property income is coming via a limited company.




https://beta.companieshouse.gov.uk/officers/srsWDTlnG0qG0yDgw1Is-Auy96w/appointments