Help to Buy ISA & Tax Conundrum

Notnefmail

Hi,

I and my partner have both paid in to the government's Help to Buy ISA since it opened. We have £13k in these ISAs between us (so a bonus of at least £3.25k, likely higher by the time we find a house).

This bonus is only paid out on house values of up to £250k and unfortunately we are searching in some of the UK's fastest growing and most competitive markets (South Manchester/North Cheshire).

Here are my conundrums...

1) I am currently named as a 50% beneficiary to a property following a family bereavement. Long story short, the other 50% (executor of the will) isn't sure what they would like to do with the property at the moment.

It is under £250k in value and I have enough saved to buy the remaining 50% outright (although it's not where we would like to live, even for a short time).

Question: If I was to buy the remaining 50% share of this house outright with my partner, would I still be entitled to the government's Help to Buy ISA bonus on the basis that the home value is still beneath £250k and I have never owned/have a named ownership of a property?

Second conundrum:
Even if I bought this remaining share out, it's likely I would need to sell, rent or purchase a second property, closer to the £350k mark.

I wouldn't receive the government ISA bonus either way.

However, if I bought, then I would then be liable to an additional £5,000 in stamp duty (as a first time buyer I would otherwise have had relief on the first £300k of the purchase value, therefore would pay £2.5k instead of £7.5k).

Unfortunately I don't have the cash to buy the ideal home first and then buy the second property out too (plus I'd be looking to either rent or sell it on soon after, and gather that the first property ownership then stitches me from a tax (40% bracket) and capital gains perspective...

Question is this:
Is there a better way to approach this commercially than I've currently considered (above)? The pain of the additional £5k far outweighs the loss of the ISA bonus (we don't really need to bonus to complete a purchase given the stamp duty relief for 1st time buyers).

Last conundrum:
If I was to buy out the cheaper property in cash and went on to rent this, but continued renting (as opposed to owning) in our current area - question - how would this work from a tax perspective - ie, if I don't have another owned property, am I still susceptible to tax on the income at my current (40%) rate? I assume so - but could be wrong.

Same question for capital gains too, should it be sold instead.

Any sage advice - as always - would be greatly welcomed.

Thank everyone

00ec25

Notnefmail wrote: »

Last conundrum:
If I was to buy out the cheaper property in cash and went on to rent this, but continued renting (as opposed to owning) in our current area - question - how would this work from a tax perspective - ie, if I don't have another owned property, am I still susceptible to tax on the income at my current (40%) rate? I assume so - but could be wrong.

Same question for capital gains too, should it be sold instead

quite why people who rent think that cost should be offset-able against the income they receive from letting a property is a mystery.

you are not wrong

you are a higher rate tax payer
you pay tax on your total income
if you income comprises more than one source then you pay tax on the total of all sources of income, and that patently includes rental profit
once your income goes over the higher rate threshold it does not matter where any further income comes from, be it rent, non ISA interest, or a second job, anything and everything above the threshold will be taxed at 40% (until you reach the additional rate threshold when it again increases on the excess over that threshold). The technical phrase for what rate do you pay tax at for extra income is you pay tax at your "highest marginal rate"

CGT works on total income including the gain. As an existing higher rate taxpayer then you can be 100% certain your gain would be taxed all at the higher rate of CGT, which is 28% (not 40% in case you had not got that far in your researches yet)

Notnefmail

So an example of another option would be to set up a corporate - which I believe some landlords do, however benefits only really accrue when the property portfolio is 4 or 5 string.

But I don't know much about that option.

Notnefmail

And an additional sub-question regarding the Help to Buy Isa...

If I am a named beneficiary on a inheritance property and I opted to purchase the remaining half - am I no longer considered a first time buyer (ie, even if I do not intend to live there, is that my ids bonus and stamp duty exemption done with?)

Reason I ask is, had I been named as full beneficiary - surely that!!!8217;d also be the case (whether I!!!8217;d have wanted it or not).

Interesting to hear if anyone has experienced this on the forum.

Thanks
Liam

Notnefmail

To help others who may be in a similar situation, I found the following article on MAS quite useful for clarifying Stamp Duty and Help to Buy ISA bonus approaches for first-tiem buyer grey areas:
https://www.moneyadviceservice.org.uk/blog/stamp-duty-for-first-time-buyers-your-questions-answered