Stamp Duty Avoidance

And1234

Hello. I am planning to purchase a new build property in Scotland (for £265,000) as my main residence. I'm currently renting in Spain, where I have been resident for a number of years.

I own a flat in the UK (worth about £75,000) which I rent out, so I understand that as things stand, I’ll have top pay the higher rate of stamp duty (£11,200 rather than £3,250) even though the property will be my own home.

Anyone know if there is a way to avoid the additional charge other than selling the flat before buying the new house, which is something I don’t want to do.

Many thanks

sheramber

When buying in Scotland you pay Land and Buildings Transaction Tax which is different from Stamp Duty.

You can check it out here https://www.revenue.scot/land-buildings-transaction-tax

Without selling your flat you will have to pay the additional tax.

00ec25

And1234 wrote: »

which is something I don’t want to do.

the WHOLE point of ADS is to tax people doing exactly that

you want to own 2 properties. You are buying an additional property and must pay the supplement. End of.

a more complex answer would require you to explain how long have you been in Spain and where did you live when previously living in the UK.... although the likelihood of that altering your position is slim

Caz3121

And1234 wrote: »

I’ll have top pay the higher rate of stamp duty (£11,200 rather than £3,250) even though the property will be my own home.

its not the higher rate instead of the lower. It is the higher rate as well as the lower...so it is an additional £10,600 on top of £2,850...total due £13,450

DoctorStrange

You can perhaps look into gifting/selling a 50% share in the flat. This would bring your interest in it below £40k and so wouldn't be counted in the ADS calculations.

You could also maybe look at selling the flat, buying the new place then buying another flat for similar value so that the ADS is 4% of the value of the flat rather than the house.

lr1277

DoctorStrange wrote: »

You can perhaps look into gifting/selling a 50% share in the flat. This would bring your interest in it below £40k and so wouldn't be counted in the ADS calculations.

You could also maybe look at selling the flat, buying the new place then buying another flat for similar value so that the ADS is 4% of the value of the flat rather than the house.

If you choose to gift or sell your rental property, you will have to pay CGT.
CGT on properties is 28%.
So you should work out if the additional duty is more or less than the CGT you will have to pay. And if you gift a share of property, you will have to find the proceeds for tax without having the benefit of any monies received on selling the property.

tempus_fugit

Caz3121 wrote: »

its not the higher rate instead of the lower. It is the higher rate as well as the lower...so it is an additional £11,200 on top of the £3,600...total due £14,800

£13,450 according to the tax calculator.

campbell19925

lr1277 wrote: »

If you choose to gift or sell your rental property, you will have to pay CGT.
CGT on properties is 28%.
So you should work out if the additional duty is more or less than the CGT you will have to pay. And if you gift a share of property, you will have to find the proceeds for tax without having the benefit of any monies received on selling the property.

So much mis-information here.

CGT is 18% unless you are a higher rate tax payer then it is 28%.

You have a CGT-free allowance to use up first of £12,000. And unless you have ridiculous circumstances you will not have to pay any capital gains tax on the sale of that flat. Or a minimal amount depending on how much you bought that flat for in the first place.

00ec25

tempus_fugit wrote: »

£13,450 according to the tax calculator.

agreed...although ADS is calculated differently to higher rate SDLT since it is a separate addition, rather than being an across the board rate increase

LBTT (normal rate)
145,000 @ 0% = £0
105,000 @ 2% = 2,100
15,000 @ 5% = 750

plus ADS @ 4% flat rate on 265,000 = 10,600

total payable 13,450
https://www.revenue.scot/land-buildings-transaction-tax/guidance/calculating-tax-rates-and-bands

00ec25

campbell19925 wrote: »

So much mis-information here.

CGT is 18% unless you are a higher rate tax payer then it is 28%.

technically that statement is misleading since it is not based on whether you are a higher rate taxpayer to start with, the gain may take your "total income" above the higher rate band and so trigger the 28% rate since CGT is worked on "total income"


it is also not an either/or situation. Depending on the amounts, if you span the threshold you can pay a bit at 18% and the rest at 28%.

i agree though for a flat "worth" 75k any CGT payable after any unused allowance has been knocked off the gain would be pretty small unless the flat has been owned a long time and was bought cheap obviously

lr1277

campbell19925 wrote: »

So much mis-information here.

CGT is 18% unless you are a higher rate tax payer then it is 28%.

You have a CGT-free allowance to use up first of £12,000. And unless you have ridiculous circumstances you will not have to pay any capital gains tax on the sale of that flat. Or a minimal amount depending on how much you bought that flat for in the first place.

I don't believe the calculation is as simple as you or I made it out to be.
More details here: https://www.gov.uk/capital-gains-tax/rates

Based on research for my own situation which I can't say I understand fully. However the website above suggests you add your capital gain (minus allowance) to your income, to find out your taxable band. This addition can push you up into the next tax bracket.
I will be using an accountant to calculate my tax liability.

OP: you should do your own research and/or get professional advice. Good luck.