Stamp Duty Question

Cossack21

Hello everyone

i own a house that I used to live in, but now rent out. I live in my partners house.

can I buy a £40k share of my partners house to reduce her mortgage without paying stamp duty?

can I buy more than a £40k but only pay stamp duty on the bit I own? Not the whole property value?

thanks in advance

p00hsticks

You already own one property, and if you buy a share of your partners you'll own (at least part of) two, so (assuming we're talking England here) as far as I'm aware you'll have to pay the 3% additional property surcharge

Cossack21

Hi, thanks, yes ok to pay the 3%, does this not apply to the £40k limit?

sheramber

The additional stamp duty applies to value of £40,000 or more.

https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro

SDLT_Geek

For the purposes of stamp duty land tax the "chargeable consideration" can be more than the cash sum paid, especially where there is a mortgage involved.  For example, OP might be paying £40,000 for a 1/3 share in the equity, the equity in the property being £120,000.  That could be because the property is worth £300,000 and the existing loan is £180,000.  In OP buying into the property, OP is likely to be required to take on responsibility for mortgage repayments.  This will mean the chargeable consideration for the 1/3 share is not only the £40,000, but also a fraction of the mortgage, perhaps £60,000 worth.  This would mean SDLT is due on £100,000 at 3%.
  
Alternatively, OP in putting £40,000 into a £300,000 house might only be getting a 7.5% share in the house.  That would make the chargeable consideration £40,000.  That is just enough to trigger the 3% surcharge, so OP might want to reduce the share slightly so it is worth just under £40,000.

Cossack21

Hi, the house is worth £230k with a mortgage balance of £140k.

Would be keen to work out a) how much stamp duty on £40k and £70k (70k being same share as what my partner owns).

Could go on mortgage but not sure if this is needed?

SDLT_Geek

A difficulty here is that you are thinking of the share in the equity, whereas for property and stamp duty land tax purposes we need to think of the ownership of the property as a whole.

For instance, your partner currently owns the whole of a £230,000 house.

If you want to be on an equal footing you could pay her £35,000 cash and agree to pay half of the mortgage.  You would then own it equally.  SDLT would be due on £115,000, charged at 3%, so £3,450.

Cossack21

Thanks, if I buy a £40k share and am not on the mortgage is this an option?

SDLT_Geek

If you buy into the property you will likely want to be registered as a joint proprietor on the Land Registry title.  That will require the involvement of the lender who (someone will correct me if I am wrong) will surely require you to be liable on the mortgage.

Slithery

Cossack21 said:

Thanks, if I buy a £40k share and am not on the mortgage is this an option?

You won't be able to buy a share of the house if you're not on the mortgage.

AdrianC

Cossack21 said:

Thanks, if I buy a £40k share and am not on the mortgage is this an option?

The lender will not agree to the change of ownership on the land registry registration - which IS the "ownership".

That's because in the event they need to repossess, they can't - because their borrower doesn't own the entire property.