Second home stamp duty - Does this count? Help

monster_moodle

Hello everyone,

Over 15 years ago, before my Husband and I even met, his Mother was told by a Court that she was to sell her house in order to pay the debtors her deceased Husband owed money to. In order to save his Mother and keep her in her home, my Husband and his Mother remortgaged the house in both of their names and now jointly own the house as joint tenants. He paid for the mortgage up until a couple of years ago and then she took over as she is the one living there.

We were married in 2014 and in 2015 I bought a flat by myself, in my own name where we live. His Mother lives in the house. We lived there for a couple of years with her.

Now it is 2019 and I have sold my flat and am looking to buy a house in my name only for us, as we have a family. However, I have come across some information about second homes and stamp duty.

I guess my question is, am I liable to pay second home stamp duty because he jointly owns this house purely to keep her in it? I am looking at a place around £190k and was expecting to pay £1300 stamp duty. However, if I have to pay second home tax it will be £7k! I didn't know if there were any sort of exceptions and just wondered if anyone could tell me if so. I feel as though I am being punished for being married.

Also, is there anything we could do? She refuses to sell the house. My Husband doesn't won't to force the sale as it's his Mother. She is 79. He has 3 other siblings who are not involved. Could they pay off the mortgage and the 4 kids split the house between them? The house is worth about £140k and there is about £25k left on the mortgage.

It just seems so complicated and Im trying to figure a way out of this mess.

Thanks for any help.

steampowered

As well as the stamp duty, you need to think about the mortgage.

It sounds like your husband will be on the mortgage for the other property. This will show on his credit report because he is responsible to the bank if his mother stops paying.

That could cause an issue because that mortgage will be taken into account when your lender assesses affordability.

I don't think it is a good idea for the 4 kids to split the house - then they'll all face higher rate stamp duty.

The best option might be to pay off the £25k left on the mortgage, if there is any way to do that, and transfer the property to be in the mother's name only.

Keep_pedalling

Selling one property to buy another one does not attract the additional tax.

monster_moodle

steampowered wrote: »

As well as the stamp duty, you need to think about the mortgage.

It sounds like your husband will be on the mortgage for the other property. This will show on his credit report because he is responsible to the bank if his mother stops paying.

That could cause an issue because that mortgage will be taken into account when your lender assesses affordability.

I don't think it is a good idea for the 4 kids to split the house - then they'll all face higher rate stamp duty.

The best option might be to pay off the £25k left on the mortgage, if there is any way to do that, and transfer the property to be in the mother's name only.

Thank you for you response. Yes he is on the mortgage with his Mother and it is for this reason why I bought the flat purely in my name so as not to take his earnings etc into consideration and it's the reason why Im buying a house by myself as well. The bank did not ask about his finances when I got my mortgage.

The only problem with paying off the mortgage and then putting it in her name is that my Husband will have paid roughly 60k into this house and then not be entitled to anything. I would not trust her to leave the house or a significant amount of it to him in her will when she passes away.

Could there be a legal agreement made in which we pay off the mortgage, put it in her name with the condition of him getting his money back when she passes away? Or, the 4 kids pay the mortgage off between them, transferring it in Mother's name & an agreement made in the same way?

Thanks again.

monster_moodle

Keep_pedalling wrote: »

Selling one property to buy another one does not attract the additional tax.

My Husband owns a house as well which will not be sold.

According to HMRC, this house counts as mine as well as we are married, which means I have two houses and therefore have to pay 2nd house stamp duty when I sell my flat and buy a house.

steampowered

monster_moodle wrote: »

The only problem with paying off the mortgage and then putting it in her name is that my Husband will have paid roughly 60k into this house and then not be entitled to anything. I would not trust her to leave the house or a significant amount of it to him in her will when she passes away.

Could there be a legal agreement made in which we pay off the mortgage, put it in her name with the condition of him getting his money back when she passes away? Or, the 4 kids pay the mortgage off between them, transferring it in Mother's name & an agreement made in the same way?

This is a good idea. It is possible to have an agreement between the mother and husband/siblings under which the mother agrees that, when the house is sold, the siblings will be entitled to get £x from the sale proceeds.

£x would be the amount the siblings pay towards the mortgage, perhaps plus interest.

The agreement could say anything left to the siblings on mother's death would count towards the £x.

The agreement would be enforceable against the estate after the mother's death.

I guess an agreement like that could be emotionally difficult - because it forces people to confront their mortality - but sounds perfectly reasonable to me.

[Deleted User]

monster_moodle wrote: »

My Husband owns a house as well which will not be sold.

According to HMRC, this house counts as mine as well as we are married, which means I have two houses and therefore have to pay 2nd house stamp duty when I sell my flat and buy a house.

You are replacing your main residence therefore the higher rate of SDLT does not apply. As a married couple you can only have one main residence for tax purposes which is the flat you live in which you have now sold. In terms of SDLT it makes no odds as to whether you purchase the new home in just your name or both your names.

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09730

00ec25

- you are married and live together. It does not matter that you alone owned that property. He is deemed to also own it by virtue of marriage
- it appears you are selling / have sold the marital home
- it appears you are buying a new home where you will both live


On that basis you are REPLACING your main home with a new main home and therefore you are not buying an "additional" property. That is a specific exclusion from the higher rate rules


BUT the order of events is important:
a) buy the replacement marital home on the same day (or after) you complete the sale of the old martial home and you will pay only the standard rate
or
b) sell the old home after you buy the replacement and you would have to pay the higher rate but could then claim the extra back as a refund if you sell within a certain time limit.


NOTE if you sell and then live somewhere else before buying, the somewhere else will be ignored if that is a rental, but if you purchased that somewhere else then that will mess up the above situation

foxy-stoat

monster_moodle wrote: »

Could there be a legal agreement made in which we pay off the mortgage, put it in her name with the condition of him getting his money back when she passes away? Or, the 4 kids pay the mortgage off between them, transferring it in Mother's name & an agreement made in the same way?

Thanks again.

Get the Mother to write a Will, maybe a loan agreement as well.

Does your Husband have a spare £25,000 to clear the mortgage? Seems a bit odd to pay out £25,000 cash only to save £7,000 on the stamp duty.

monster_moodle

00ec25 wrote: »

- you are married and live together. It does not matter that you alone owned that property. He is deemed to also own it by virtue of marriage
- it appears you are selling / have sold the marital home
- it appears you are buying a new home where you will both live


On that basis you are REPLACING your main home with a new main home and therefore you are not buying an "additional" property. That is a specific exclusion from the higher rate rules


BUT the order of events is important:
a) buy the replacement marital home on the same day (or after) you complete the sale of the old martial home and you will pay only the standard rate
or
b) sell the old home after you buy the replacement and you would have to pay the higher rate but could then claim the extra back as a refund if you sell within a certain time limit.


NOTE if you sell and then live somewhere else before buying, the somewhere else will be ignored if that is a rental, but if you purchased that somewhere else then that will mess up the above situation

Thank you for your comments. I have sold my property, we are exchanging today hopefully. I am not buying another property straight away. We are moving up the Country, so will be staying with family before I start my new job and buy a house 3 months later.

As far as I understand then and correct me if I am wrong. When I come to buy my house, I will not have to pay 2nd home stamp duty because my new house will be my main residence and the other house that my Husband bought it not our main residence?

Thank you for everyone's comments. It has been a great help and relief.