Stamp Duty on Buy to Let

Bhames82

Hi,
My wife owns our current home outright and we are looking to move into a new home. Our mortgage advisor has said we could keep our current home (current main residence) and rent it out, and by freeing up equity in a rent to buy mortgage, can buy a new home for us to live in (our new main residence). We would have a mortgage on the new home also, but the equity would free up a sizeable deposit meaning the rent from the let house will cover the buy to let mortgage and a hefty chunk of our residential mortgage.
We are unclear whether we would have to pay the higher rate of stamp duty on the new house purchase however. Our mortgage advisor seems to think we wouldn't but all other signs and advice online seems to show we would. He said that as we are replacing our main residence then the higher rate would not apply.
Any help? Have tried the calculator and not sure it applies correctly.
Thanks

p00hsticks

Bhames82 wrote: »

Hi,
He said that as we are replacing our main residence then the higher rate would not apply.

But you're not replacing your main residence, are you ?

You're purchasing a new main residence but retaining the old one.

Replacing means that you dispose of your existing main residence to purchase another.

steampowered

You are not "replacing" your main residence so it sounds like you would have to pay higher rate SDLT.

Also, BTL mortgages tend to be at a higher interest rate than residential mortgages. So you are probably better off having a bigger mortgage on your new property, and a lower mortgage or no mortgage on your current property.

You shouldn't sleep walk into buy-to-let. There are other investment options which are better for most people. Do consider the legal responsibilities and costs you would have as a landlord; and the fact that you would be paying income tax on the rent, and capital gains tax when you sell.

Do consider other options such as putting the money into a stocks & shares ISA (where your returns will be tax free) or into pension (which can net you a giant 40% tax relief if you are a higher rate tax payer, or 20% if you are a basic rate tax payer).

[Deleted User]

Bhames82 wrote: »

Hi,
My wife owns our current home outright and we are looking to move into a new home. Our mortgage advisor has said we could keep our current home (current main residence) and rent it out, and by freeing up equity in a rent to buy mortgage, can buy a new home for us to live in (our new main residence). We would have a mortgage on the new home also, but the equity would free up a sizeable deposit meaning the rent from the let house will cover the buy to let mortgage and a hefty chunk of our residential mortgage.
We are unclear whether we would have to pay the higher rate of stamp duty on the new house purchase however. Our mortgage advisor seems to think we wouldn't but all other signs and advice online seems to show we would. He said that as we are replacing our main residence then the higher rate would not apply.
Any help? Have tried the calculator and not sure it applies correctly.
Thanks

Your mortgage advisor is talking rubbish. You are purchasing an additional residential property therefore the higher rate of SDLT for the purchase of additional residential properties will apply. I do hope he is better at advising on mortgage than he is on matters of tax.

https://www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property

tom9980

Mortgage advisor would get two lots of commission so naturally wants clients to take two mortgages irrespective of their clients ability to run a landlord business at perhaps the worst time since the late 1980's with more regulation on the way designed to curb BTL.

Cakeguts

Get a different mortgage adviser. This one clearly has no idea what is involved with a buy to let property and thinks wrongly that you will be guaranteed to be able to pay the mortgage on the buy to let property 100% of the time without anything going wrong.



Experienced landlords are selling buy to let properties now because of the increase in regulation and the possible loss of section 21 and you as an absolute beginner who knows nothing about the business apart from what a dire mortgage adviser has said are thinking of getting into it.



You don't even know if your current property would make a good buy to let property and yet you are considering this. My advice would be to change mortgage advisers as soon as possible. The one you have got is talking complete rubbish.