Question about stamp duty on a second home

gsusx

Hi All,

Was really hoping someone may be able to help, i'll do my best to get the order correct to make it easier (it confuses me at the moment) . So my question is around stamp duty on a "second home"

So here's my situation. Back in 2001 I bought a flat, in 2009 I met my now wife and we then bought a house together. I still own my flat (it's under my name) and a friend of mine is letting off of me.

Because of a few recent family developments I've made a decision to make some changes to our family life.

So here's the plan and the order !!!

1. Sell Flat
2. With equity from flat buy new holiday home nearer parents, this will then be used as a holiday home but also as an Air BNB rental (plan is to get the small buy to let mortgage)
3. Sell current house that we live in and buy a new house that we will then live in.

My question is this, if I do it in that order will I have to pay the extra 3% stamp duty on my "new house" that I will buy (and then live in day to day, the one in point 3) or do I pay the extra 3% on the "holiday home" the house in point 2.

Obviously quite worried because there is a big difference in house prices between the holiday home and the home we plan to buy and live in.

Hope i've worded this okay and really appreciate any help you can give. Thanks

00ec25

first off it is not tax on a "second home"

it is tax on the purchase of an additional property.

you would pay the higher rate on the purchase of the "new holiday home nearer parents" because at the point you complete on that purchase you will only own 1 property (the marital home) having sold the flat and so will be buying an additional property (the holiday one) as you will be going from 1 to 2 properties owned

when you then sell the marital home and buy a replacement marital home, that purchase will be exempt because it is a replacement of your main home

read the guide:
https://www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property

https://www.gov.uk/government/publications/stamp-duty-land-tax-higher-rates-for-purchases-of-additional-residential-properties

ognum

Sorry confused wrong advice given removed so no one get something wrong Sorry

00ec25

ognum wrote: »

I believe it’s a question of the order you do this in.

You should

Sell additional flat (pay CGT)- now you only own one property
Buy new family home, if you sell main home.
Buy new family home - no extra SD
Buy holiday home which I assume will be cheaper, pay extra SD.

the purchase of the new main home will be exempt whatever order he does it in

gsusx

Hi everyone. Thank you all so much for taking the time out to let me know your thoughts, again I really appreciate you taking the time to reply, it really eases my worries

buggy_boy

ognum wrote: »

I believe it’s a question of the order you do this in.

You should

Sell additional flat (pay CGT)- now you only own one property
Buy new family home, if you sell main home.
Buy new family home - no extra SD
Buy holiday home which I assume will be cheaper, pay extra SD.

To confirm with 00ec25 The above advice is wrong...

Are you both 40% tax payers? If so it may be worth talking to a property expert accountant as it may be beneficial to put the holiday home in a limited company, it makes no difference to SDLT but depending on any other investments you have money generated by the AirBnb. You will be able to remove £2000 each from the company in dividends tax free, as you will be loaning the money to the company it can pay you interest (£500 each tax free as 40%). If your wife does not work you can pay her a wage from the property, this will give her NI stamps. Also all the money you gave the company can be taken out tax free... (Not you will have to pay company tax currently 19%). You can also leave the money in the company until you are 20% or less tax payers then you will only pay 7.5% dividend tax on the dividends... Then there is small things like the company can pay for your mobile phones (Must be on buisness contract) and you can have annual events that are tax deductible upto £150 per director. It gets complicated hence if you are interested go see a property expert accountant.

ognum

Yup you are right slip of the brain! Origional advice removed!

gsusx

This is awesome advice. I really do need to speak to an expert, you are 100% right.