Moving in or BTL?

paduk

Hello,
My partner and I are trying to figure out the best way to optimize the following situation.

In 2009 I bought a two bedroom flat (cash) and I have been living in it since.

In 2017 my partner moved in with me and now he is thinking about buying a property (he is a first time buyer and circa 75% of the property value to be covered by a mortgage).

Now, if he is to let his place out he will need to pay:
- a higher stamp duty,
- a higher interest rate on the mortgage,
- 40% on the let to buy income.
This means, very roughly, that the rent will cover around 60-65% of the mortgage.

On the other side, if we decide to rent out my place and move to his then he will pay:
- a lower stamp duty,
- a lower interest on the mortgage,
- fully pay for his mortgage with no help from renting it out.
But, in this case, I will need to pay capital gains tax on my property if I ever decide to sell.

We are not married or in a civil partnership and prefer to keep our finances separated in terms of properties.

Any thoughts on how to best handle this? We are struggling to find a sweet spot.

Every idea/thoughts is very much appreciated.

Thanks

G_M

paduk wrote: »

Hello,
My partner and I are trying to figure out the best way to optimize the following situation.

In 2009 I bought a two bedroom flat (cash) and I have been living in it since.

In 2017 my partner moved in with me and now he is thinking about buying a property (he is a first time buyer and circa 75% of the property value to be covered by a mortgage).

Now, if he is to let his place out he will need to pay:
- a higher stamp duty, why?He is a FTB so this is his 1st and only property. No additioanl SDLT
- a higher interest rate on the mortgage,
- 40% on the [STRIKE]let to buy [/STRIKE]income. If he is a 40% rate tax payer, he pays 40% on his income, yes.
This means, very roughly, that the rent will cover around 60-65% of the mortgage. I assumeyou mean the rent after tax. What about the other leting costs? Has he done a full budget?

On the other side, if we decide to rent out my place and move to his then he will pay:
- a lower stamp duty, No, see above
- a lower interest on the mortgage, Yes, a residential mortgage will be cheaper than a BTL.
- fully pay for his mortgage with no help from renting it out. yes but presumably as you'll be living there, you'll contribute o his costs, using the money you receive from leting your own place?
But, in this case, I will need to pay capital gains tax on my property if I ever decide to sell. Yes though subject to allowances for the time it was your main residence.
And conversely if he lets his place, he'll have to pay CGT.

..............................................................................

SDLT_Geek

paduk wrote: »

Now, if he is to let his place out he will need to pay:
- a higher stamp duty,

On the other side, if we decide to rent out my place and move to his then he will pay:
- a lower stamp duty,

We are not married or in a civil partnership and prefer to keep our finances separated in terms of properties.

SDLT could indeed be lower if your partner intends to live in the new place if that means that first time buyers' relief is available. It is only available where the buyer intends to live in the property and where the price does not exceed £500,000. For example a £300,000 property to live in for a first time buyer would have no SDLT, if it is to be rented out it would be £5,000 SDLT. There is detail about first time buyers' relief here: https://www.blakemorgan.co.uk/news-events/blog/sdlt-first-time-buyers-relief/