Selling old home versus investment

justme111

No you will not be able to keep buying and selling to avoid CGT as you would need to leave in those houses for them to have it reduced/exempt

flopsy1973

Hi
Have found potential property around the 235k so with the above in mind and also after i believe that i will be liable for a 2nd home premium on council tax, i am considering putting my first property into my brothers name as he has no house in his name and has no intention of getting one for now. Is this a plausible way of doing this or are there things i have not considered. Or is my original idea better and sell my first house? thanks

AnotherJoe

flopsy1973 wrote: »

Hi
Have found potential property around the 235k so with the above in mind and also after i believe that i will be liable for a 2nd home premium on council tax, i am considering putting my first property into my brothers name as he has no house in his name and has no intention of getting one for now. Is this a plausible way of doing this or are there things i have not considered. Or is my original idea better and sell my first house? thanks

You'd have to pay CGT on the value of the house even if you "gave" it to him for nothing.
Your brother would lose any future benefits such as first time buyers exemption from SDLT and whatever else there is.
If your brother ever did buy a house to live in he'd have to pay teh extra 3%.
Your brother would become a LL with all the legal and financial duties that involves including paying tax on the income.
If you and your brother ever fell out he could keep the house and stick two fingers up to you.
If your brother got / is married the house could be lost in a divorce settlement.

If he got into financial difficulties it could be repossessed.
Other than that i see no issues with your plan.

p00hsticks

flopsy1973 wrote: »

Is this a plausible way of doing this or are there things i have not considered.

To give away an entire property just so as to avoid paying 3% extra SDLT seems daft. And I suspect that you'd still be potentially liable for CGT based on the full market value at the time of the transfer.

katsu

Getting 5% on £100k every year would involve some risk I think.

flopsy1973

So if I sold the house now before buying the other I would pay no CGT? Can I potentially buy the other one while mine is being sold and pay the lower rate of stamp duty?
Thought the giving my house away wouldn't be that easy! So I definitely will be liable if I transfer house to someone else. What about putting it in trust for my children ?
Is there something that I'm missing with the 2nd home premium on council tax?

AnotherJoe

MarkBargain wrote: »

You write the tax is a shock, but it is 3% on top or normal stamp duty rates so a few months' rent should pay it off surely unless your new house is much more expensive?

https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

The rent won't pay it off that quickly because you need to calculate the profit on the rent and even if there was no mortgage on the rental, that means a bigger mortgage on the new house, on which OP is paying interest. So the extra SDLT woudl need to be paid off from the difference between incoming rent,maintenance and other expenses, and mortgage interest (ata higher rate due to mortgage being much larger. Probabiy looking at 2 years to pay back. Extra 3% SDLT on 250k is £7,500.

p00hsticks

flopsy1973 wrote: »

So if I sold the house now before buying the other I would pay no CGT? Can I potentially buy the other one while mine is being sold and pay the lower rate of stamp duty?
Thought the giving my house away wouldn't be that easy! So I definitely will be liable if I transfer house to someone else. What about putting it in trust for my children ?
Is there something that I'm missing with the 2nd home premium on council tax?

You'll potentially liable to pay CGT on the first property, it will depend on whether it;s been your PPR (principal private residence) for any time - looking back at your previous posts I can see if you've previously lived in it at all. There are CGT calculators around that will help you ork out what (if anything) is due.

As fas as I'm aware there's no '2nd home premium' on council tax. However there is a premium charged after leaving a property empty for more than a certain amount of time

AnotherJoe

flopsy1973 wrote: »

So if I sold the house now before buying the other I would pay no CGT? Can I potentially buy the other one while mine is being sold and pay the lower rate of stamp duty?
Thought the giving my house away wouldn't be that easy! So I definitely will be liable if I transfer house to someone else. What about putting it in trust for my children ?
Is there something that I'm missing with the 2nd home premium on council tax?

Assuming you always let this house out you'll always have to pay CGT on it. Its got nothing to do with how many houses you have.
Consult a tax expert for other ways of avoiding tax but generally speaking transfer to a "connected party" means theres no loophole in these sorts of operatins.
Note, there's a phrase, "dont let the tax tail wag the dog".
In your case you seem to be looking at all sorts of strange things which will cost you lots of money to avoid paying less money in tax than you give away;

You; "hey brother here's a free £100k house, so glad i dont have to pay £5k in tax now"
Brother "great thanks I've just sold it and bought myself a nice round the world cruise. Very generous of you."

Yes if you sell the BTL at the same time you buy another you wont ahve to pay the extra 3% SDKT or you can sell within 3 years and reclaim it.
Like other posters, i dont know what "2nd home premium on council tax" is.

flopsy1973

There is a 25% premium on second homes in Wales from what I can see.
If I transfer to brother it would be purely in name he would not touch the money in it
I have lived in the house a few years back it was my home
So any tax experts know of any ways round this ?