Stamp Duty Questions

Kev's_Old_Lady

Hi - I'm currently living with my partner who owns outright his property. We are going to purchase a property together with cash from my house sale and cash from his pensions, then letting out his property to replace his pensions. I've just discovered that will make us liable for stamp duty at around £3600 which we are reluctant to pay seeing as he paid an enormous amount of tax on cashing in his pensions. So I plan to purchase the new property in my name only which should solve the problem for now but for future does anyone know if we would become liable for stamp duty a) if and when we get married? b) if I gifted half the property to him? Also if he gave his rental property to his son would that make a difference? HMRC helpline were actually no help

davidmcn

Stamp Duty is payable on the consideration for a transaction i.e. the price. So getting married doesn't trigger it and neither do gifts.

gingercordial

Kev's_Old_Lady wrote: »

Hi - I'm currently living with my partner who owns outright his property. We are going to purchase a property together with cash from my house sale and cash from his pensions, then letting out his property to replace his pensions. I've just discovered that will make us liable for stamp duty at around £3600 which we are reluctant to pay seeing as he paid an enormous amount of tax on cashing in his pensions. So I plan to purchase the new property in my name only which should solve the problem for now but for future does anyone know if we would become liable for stamp duty a) if and when we get married? b) if I gifted half the property to him? Also if he gave his rental property to his son would that make a difference? HMRC helpline were actually no help

He'll be taking quite the risk there, handing over his pension money to you to buy the house. He will have no protection at all and no ability to get it back if you split up, or die without a will leaving it to him.

Is this really a better investment yield than his pension fund would have been with its tax benefits?

Kev's_Old_Lady

Needs must I'm afraid, it was the only way to buy a house together, long term we hope the rented house will increase in value and the rental income we can invest and we will most certainly be sorting out wills etc

00ec25

Kev's_Old_Lady wrote: »

Hi - I'm currently living with my partner who owns outright his property. We are going to purchase a property together with cash from my house sale and cash from his pensions,

so there will be no mortgage at all involved? This is important re your subsequent questions...

if I were him and had cashed in my pension and am now totally dependent on the relationship surviving to ensure that I can still have a claim to the money I'd given away I would want to arrive at scenario 2 asap otherwise you can walk away with his money ...

Kev's_Old_Lady wrote: »

a) if and when we get married?

I 'll call this Scenario 1
you can transfer a share (or all) of the property without SDLT being triggered IF the chargeable consideration is below the thresholds applicable to the higher rate SDLT given he is already the owner of the rental property so he would be acquiring an additional property for the first time irrespective of the fact he lives there

i) the total amount of money he pays to you (the chargeable consideration) must be less than £40,000 and the share of the property he receives by such payment must also be worth less than £40,000

OR
ii) he does not pay you any cash at all, but there is an outstanding mortgage on the property to which he is not already a party. When he then becomes liable for the mortgage (lenders don't allow owners who are not on mortgages) 50% of the value of the o/s mortgage is chargeable consideration. If that is more than £40,000 he will be liable for SDLT on the whole amount. Note it is 50% because mortgages are joint and several liability, that means if your actual ownership is unequal shares (ie you own as tenants in common with unequal shares) that will be ignored for SDLT purposes

Kev's_Old_Lady wrote: »

b) if I gifted half the property to him?

I'll call this scenario 2
marriage does not alter the position, it is the transfer of chargeable consideration which matters, if there is no o/s mortgage then a gift is zero chargeable consideration

Kev's_Old_Lady wrote: »

Also if he gave his rental property to his son would that make a difference? HMRC helpline were actually no help

I'll call this scenario 3
probably not very tax efficient:
- he would trigger capital gains tax for himself based on the value of the property being gifted
- son would become the LL with all that entails in terms of administering the change of LL and the ongong income tax liability
- son would trigger CGT for himself if he were subsequently to transfer the property back to his father