Stamp Duty

bluee678

Hi, could anyone help me clarify stamp duty please. If I have a home already at a cost of £90k and I am buying a second home at £390k. Do I still pay stamp duty on the second home? Or because the total of the two homes is under £500k will I be exempt under the current stamp duty rules?  I'd appreciate any clarification. I'm a tad confused

CSL0183

bluee678 said:

Hi, could anyone help me clarify stamp duty please. If I have a home already at a cost of £90k and I am buying a second home at £390k. Do I still pay stamp duty on the second home? Or because the total of the two homes is under £500k will I be exempt under the current stamp duty rules?  I'd appreciate any clarification. I'm a tad confused

No need to be confused, the current £500k Stamp duty holiday that runs to the 31st March is applicable to 1 house only. As you already own property and are buying an additional property, you will be liable for the 2nd home tax of 3% of the purchase price (£390k x 1.03 = £11,700) 

If this runs past the 31st March then you will be due..

2% on the £125k (From £125k-£250k)
5% on the £140k (From £250k-£390k)

£2,500 + £7,000 + £11,700 (2nd home tax) = £21,200 so as long as you complete before 31st March you will save yourself £9,500. 

CSL0183

And no, I don’t believe there is any way to flip your homes so that you can apply main residence to the £390k home as on the date of completion of that purchase you can only have one home. You would effectively need to sell the £90k home so you were property free, then buy the £390k home with no Stamp duty due and then re buy back the £90k home and then only pay the 3% on that. I think time lines would be very tight for that (selling, buying and then buying again ) and also whether that plan would ever work with the Land registry. I am pretty sure there are rules about flipping homes like this to avoid the costs. 

MWT

If you are making the new purchase your main residence then you have 3 years within which to sell your previous main residence and reclaim the 3% higher rate SDLT that you paid.

[Deleted User]

You could sell your 90k property to yourself in a ltd company and have that complete 2nd to reverse the order of which one is higher rated.   Never done it but specialist lenders keep prattling on about it.   I might be mistaken with the details though

bluee678

Thanks all I appreciate your replies. Guess I was wishful thinking 😊

davidmcn

Deleted_User said:

You could sell your 90k property to yourself in a ltd company and have that complete 2nd to reverse the order of which one is higher rated.   Never done it but specialist lenders keep prattling on about it.   I might be mistaken with the details though

Pretty sure that would be caught by the anti-avoidance legislation. 

[Deleted User]

davidmcn said:

Deleted_User said:

You could sell your 90k property to yourself in a ltd company and have that complete 2nd to reverse the order of which one is higher rated.   Never done it but specialist lenders keep prattling on about it.   I might be mistaken with the details though

Pretty sure that would be caught by the anti-avoidance legislation. 

Really?  Lile i said ive not done it before but lenders (especially Precise) have had it in their sales pitch since the 3% surcharge started.  The theory always made sense to me but in practice i wasnt sure how it would work.  

davidmcn

Deleted_User said:

davidmcn said:

Deleted_User said:

You could sell your 90k property to yourself in a ltd company and have that complete 2nd to reverse the order of which one is higher rated.   Never done it but specialist lenders keep prattling on about it.   I might be mistaken with the details though

Pretty sure that would be caught by the anti-avoidance legislation. 

Really?  Lile i said ive not done it before but lenders (especially Precise) have had it in their sales pitch since the 3% surcharge started.  The theory always made sense to me but in practice i wasnt sure how it would work. 

Not waded through the caselaw or analysis, but if it's a series of transactions where the sole aim is pretty obviously to avoid the SDLT then it can be disregarded by HMRC. Maybe they have some cunning "justification" for it but I wonder if they're actually putting their money where their mouth is.

bluee678

Ok, I'm back and unfortunately more confused. I'd appreciate a little more help, if you can. I was under the impression there was stamp duty to pay but documentation came through to make all payments and the stamp duty section was £0, hence my original question. However, after your replies I went back to the solicitor to clarify why it said £0 due. The solicitor is adamant there is no stamp duty due as the new property will be my main residence even though I own another property. I can't find much information supporting this but am obviously wanting to avoid fines for unpaid stamp duty if it should be paid. I'm not really sure where to go from here. Any advice? 

CSL0183

bluee678 said:

Ok, I'm back and unfortunately more confused. I'd appreciate a little more help, if you can. I was under the impression there was stamp duty to pay but documentation came through to make all payments and the stamp duty section was £0, hence my original question. However, after your replies I went back to the solicitor to clarify why it said £0 due. The solicitor is adamant there is no stamp duty due as the new property will be my main residence even though I own another property. I can't find much information supporting this but am obviously wanting to avoid fines for unpaid stamp duty if it should be paid. I'm not really sure where to go from here. Any advice? 

Is your name on the deeds of the other property? If so, then you have two homes and are liable for the 2nd home tax. It will be picked up by the Land registry if the solicitor doesn’t catch it and both him and yourself will be liable. 

It’s there in black and white on the government website..

https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

“If you’re replacing your main residence

You will not pay the extra 3% SDLT if the property you’re buying is replacing your main residence and that has already been sold.

If you have not sold your main residence on the day you complete your new purchase you’ll have to pay higher rates. This is because you own 2 properties”

Probably best phoning the Land registry or getting a 2nd opinion from another solicitor.  You could ask your current solicitor to show you the documentation that he is referring too and what clause he is using to determine that you don’t own two homes.