Buying Second house to live in - Stamp Duty

jackouk1234

Hi There,

Short story is (and I’ve read other threads but mostly they are people wanting to do dodgy accounting to get around it) any way to legally avoid the 3% stamp duty if you buy a second home to move into and rent your original property out?

Long story:
I've owned a house worth £90k for 3 years, and exclusively lived in it. I'm now earning enough to upgrade to a bigger house (around the £200k mark). I have enough savings to put down the deposit and the charges etc (even the extra 3% stamp duty for second homes). I owe about £70k on my present house. My plan is to rent out my current house.

Issue I have is with the second home 3% stamp duty. I can understand if I was some serious property tycoon but I'm not, and I am moving my home, not purchasing a new house as a buy to let. I wouldn't hesitate to pay the extra 3% on the £90k property but I am reluctant to accept paying the 3% on the new £200k house, and being penalised as though the £200k house is a buy to let. I'm self-employed so I don't pay into a pension hence the thought to keep it as a pension, not as a general investment.

I don't believe there is any option but to stump up the extra 3% and either live with it or sell the £90k house within 3 years. Alternatively sell the 90k house, claim the 3% on the £200k house back, then buy another £90k house as a buy to let.

But are there alternatives? Am I not missing something, such as an exception if you are moving your residence? Would selling the £90k house to, say, a friend and then buying it back be above board? I also run a limited company and have thought about having the ltd company buy the house from me but I can't see that being financially beneficial.

Another reason why I don't want to sell the £90k property is because 1) it would take me DAYS to move, no matter how much packing I do beforehand 2) it needs redecorating and it's nearly impossible while I'm living there as I've massively outgrown it 3) I want to buy before the end of the summer and 4) I think I could get a better deal not being in a chain.

Thanks!

Keep_pedalling

Do you really want the hassle of being a landlord?

da_rule

There is no way around it. Your options are:

1) Sell the £90k house at the same time as buying the £200k house so you don't end the day owning more than one property;
2) Pay the extra stamp duty on the £200k house, then sell the £90k house within 3 years of buying the £200k house to claim back to extra SDLT you've paid on the purchase of the £200k house;
3) Pay the extra stamp duty on the £200k house and keep both properties.

G_M

You ar buying a 2nd property and becoming a landlord.

Is that not exactly the catagory of person the additional SDLT law was aimed at discouragng, and raising tax revenue from?

The way around this is to obtain the passport of a deceased child born some 21+ years ago and buy the 2nd property in that person's name.

Just like any other fraudster.

xylophone

I'm self-employed so I don't pay into a pension

The one doesn't follow from the other.

Time to look into starting a pension.

http://www.kirkrice.co.uk/blog/company-director-pension-payments/

ProDave

Option 4) sell the 90K house, buy the £200K house, THEN buy another 90K house to rent. That's the only way to pay the extra stamp duty on the value of the rental house rather than the £200K house. But you incur more agents fees and solicitors fees and end up with a different £90K house that may or may not be as good as the one you have.

dimbo61

You have little equity ! In your home.
You now plan on taking on more debt and becoming a Landlord !
Sell your current home and buy a new place

sheramber

The extra stamp duty is not for a buy to let property it is for owning more than one house. It equally applies to someone buying a second house as a holiday home which is never let out.

jackouk1234

Thanks, looks like there isn't anything that I have missed and I'm stuck with the 3% SD.

You have little equity ! In your home.
You now plan on taking on more debt and becoming a Landlord !

Yep. Whilst paying a mortgage off is the most cost efficient investment (I work out for every £1 I overpay, £2 is cleared off the debt over the 22 years) that doesn't help me move into a bigger house. If we were to play the cautious game I'd be living in this house for eternity!

Option 4) sell the 90K house, buy the £200K house, THEN buy another 90K house to rent. That's the only way to pay the extra stamp duty on the value of the rental house rather than the £200K house. But you incur more agents fees and solicitors fees and end up with a different £90K house that may or may not be as good as the one you have.

Exactly - I've just had a new bathroom fitted and around another £2-3k in bits here and there. I very much doubt I'll get this back by selling or find a similar house for the money. Another point RE fee's by selling - 1-2% of the value to estate agents plus maybe £1k to sell. Then another £2k to buy another (yep - I generally need to pay specialists for a mortgage). So that's £3-4k... to sell and buy another.

Time to look into starting a pension.

I have a pension, just not paying into it at the moment until I figure out my plans.

There is no way around it.

As I thought. It was a long shot.

Do you really want the hassle of being a landlord?

Not really but I don't need the money from the sale.

You ar buying a 2nd property and becoming a landlord.

Is that not exactly the catagory of person the additional SDLT law was aimed at discouragng, and raising tax revenue from?

Ish... As in my original post I'm content with paying 3% on the house I'm (possibly) renting but I'm not happy at paying 3% extra for my own home.

The way around this is to obtain the passport of a deceased child born some 21+ years ago and buy the 2nd property in that person's name.

Just like any other fraudster.

Not quite sure what warranted the attitude... I already said I want to do everything by the book and was asking if I was missing maybe a clause or something where the SD wouldn't apply to primary residence.

resk

Buy the new house and pay the extra 3%. That starts the clock on a very generous three years (it's only 18 months in Scotland!) period in which you can do up the now empty first house, sell it and claim back the 3% you paid.

IMHO.

jackouk1234

Buy the new house and pay the extra 3%. That starts the clock on a very generous three years (it's only 18 months in Scotland!) period in which you can do up the now empty first house, sell it and claim back the 3% you paid.

I'm thinking this to be honest, as above I'm not looking to become a landlord and I know I'll break even at BEST (probably be slightly out of pocket for the first 1-2 years). I'm fine with paying the mortgage until it sells, it's not a hideous amount to pay for the convenience and houses on my street sell pretty quick.