Stamp duty 2nd home surcharge enquiry

Eclipse01

Hi,

My partner and I are looking to buy a house together.  We each currently own a flat separately.  We would like to keep my partner's flat in her name, sell my flat and buy a house together.  We would have sold both flats to do this but I inherited some money so we thought it would make more financial sense to keep one flat. 

We want to own the house jointly so that we have two incomes when applying for a mortgage.  We would like to avoid the stamp duty additional charge on a second home, that we incur if my partner keeps her flat.  Is there a way for us to do this?  We thought a Joint Buyers Sole Proprietor mortgage might be the way to do this but a broker we spoke to told us that a JBSP mortgage was not possible because we will both be living in the new house.

Thanks for any information anyone can give me.

AdrianC

You own property A now
Your partner (unmarried) owns property B now.
The plan is to sell A, retain B, jointly buy C.

You will go from one property, A, to one property, C. No +3% SDLT.
Your partner will go from one property, B, to two properties, B & C. +3% SDLT.

You have two ways to avoid the +3%.
1. You buy C on your own.
2. Your partner sells B.

That's it.

What's the plan for B? Lemme guess... Let it.
Have you done the numbers...? Think about the extra borrowing you need, as well as the SDLT liability. What net yield are you foreseeing, and with what assumptions about maintenance, repairs, bad debt, voids? Will you self-manage?

saajan_12

Where do you both live now, and what sort of timeline are you looking at? Depending on whether it makes sense (in terms of where your jobs are, GPs registered, etc) can you both move into your place and partner buy a share? You'd have to pay SDLT + 3% on the consideration ie 50% value, but if the flats cheaper than the house, it might make sense. Then live there for a year (not a fixed time) and jointly sell that to buy the new house. THis assumes you'd genuinely live in the flat together, since it would take some time to find and go through the legals of the new house anyway. Can't just be a paper transaction as that would be fraud and there's ways of finding that out. 

Other side is what's the rationale behind keeping one flat? If its just cos you have extra money and want to invest, then there are other ways to invest. Keeping that flat means the stamp duty surcharge, it may not be best placed for a good rental return, it takes work to manage tenants, sort things out when the agents dont, repairs, etc. Instead, you could use it to reduce your mortgage or invest in a diversified stocks & shares fund. 

Eclipse01

saajan_12 said:

Where do you both live now, and what sort of timeline are you looking at? Depending on whether it makes sense (in terms of where your jobs are, GPs registered, etc) can you both move into your place and partner buy a share? You'd have to pay SDLT + 3% on the consideration ie 50% value, but if the flats cheaper than the house, it might make sense. Then live there for a year (not a fixed time) and jointly sell that to buy the new house. THis assumes you'd genuinely live in the flat together, since it would take some time to find and go through the legals of the new house anyway. Can't just be a paper transaction as that would be fraud and there's ways of finding that out. 

Other side is what's the rationale behind keeping one flat? If its just cos you have extra money and want to invest, then there are other ways to invest. Keeping that flat means the stamp duty surcharge, it may not be best placed for a good rental return, it takes work to manage tenants, sort things out when the agents dont, repairs, etc. Instead, you could use it to reduce your mortgage or invest in a diversified stocks & shares fund. 

Thanks for the reply and information. The context is that we want to buy a new property during the stamp duty holiday. Selling both isn’t possible for the time being due to a tenant in my partner’s flat. We both live in mind currently. 

Eclipse01

AdrianC said:

You own property A now
Your partner (unmarried) owns property B now.
The plan is to sell A, retain B, jointly buy C.

You will go from one property, A, to one property, C. No +3% SDLT.
Your partner will go from one property, B, to two properties, B & C. +3% SDLT.

You have two ways to avoid the +3%.
1. You buy C on your own.
2. Your partner sells B.

That's it.

What's the plan for B? Lemme guess... Let it.
Have you done the numbers...? Think about the extra borrowing you need, as well as the SDLT liability. What net yield are you foreseeing, and with what assumptions about maintenance, repairs, bad debt, voids? Will you self-manage?

Thanks for the reply and you’ve laid out the choices clearly. I see the downsides to keeping the flat but it’s already let through an agency and a new tenant has a lease in place so can’t sell it before the end of the stamp duty holiday, when the calculations will have changed anyway. 

Rural_Puppy

Remember you are allowed three years in England to reclaim the additional 3% stamp duty, if you sell your additional property within that period. You may also be able to reclaim possession of your partner's property, even with a tenant in place, if the intention is to sell it.