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What to do with former main home?
ftbuyer14
Posts: 11 Forumite
Hi,
I was hoping some of you clever folks might be able to help me.
I bought new home in Jan 2020 and kept my old home and rented it out since then. Approx 5-6% gross yield.
My dilemma is that as new home was deemed second residence, I ended up paying the additional SDLT of approx £8k which I would like to try claim back within the 3 year deadline. But I don't know what is the best way to do this.
Ideally I would like to keep hold of it as an investment property as it in an area of consistent rental demand. It is mortgage free.
I also plan to start adding to this small property portfolio over the next few years with the long term plan to get to 10+ properties.
Given this, I have recently started to consider setting up a SPV for this future property business as I would be a higher rate tax payer.
I am aware that to "transfer" my current rented property to this SPV would attract SDLT of approx 5k - however I would get the 8k SDLT refund as will have then 'sold' my former main residence.
Any capital gains would be covered by my annual allowance so would be ok from that perspective.
That would leave approx 3k to cover other expenses including legal expenses etc. which to me seems like a good option, or am I getting this all wrong??
Also as it is mortgage free, if I was "sell/transfer" it to the SPV, would this be deemed a Director's Loan to the SPV to the current market value of the property? And if so, can I then withdraw this tax free over the years from the SPV if funds allow?
Or is it possible to try and release some equity from it during the transfer; ie by getting it mortgaged through the SPV and still have the 'deposit' as a Director's Loan??
Any thoughts, advice or other suggestions would be most welcome. Thanks!
I was hoping some of you clever folks might be able to help me.
I bought new home in Jan 2020 and kept my old home and rented it out since then. Approx 5-6% gross yield.
My dilemma is that as new home was deemed second residence, I ended up paying the additional SDLT of approx £8k which I would like to try claim back within the 3 year deadline. But I don't know what is the best way to do this.
Ideally I would like to keep hold of it as an investment property as it in an area of consistent rental demand. It is mortgage free.
I also plan to start adding to this small property portfolio over the next few years with the long term plan to get to 10+ properties.
Given this, I have recently started to consider setting up a SPV for this future property business as I would be a higher rate tax payer.
I am aware that to "transfer" my current rented property to this SPV would attract SDLT of approx 5k - however I would get the 8k SDLT refund as will have then 'sold' my former main residence.
Any capital gains would be covered by my annual allowance so would be ok from that perspective.
That would leave approx 3k to cover other expenses including legal expenses etc. which to me seems like a good option, or am I getting this all wrong??
Also as it is mortgage free, if I was "sell/transfer" it to the SPV, would this be deemed a Director's Loan to the SPV to the current market value of the property? And if so, can I then withdraw this tax free over the years from the SPV if funds allow?
Or is it possible to try and release some equity from it during the transfer; ie by getting it mortgaged through the SPV and still have the 'deposit' as a Director's Loan??
Any thoughts, advice or other suggestions would be most welcome. Thanks!
0
Comments
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Companies also pay a 3% SDLT surcharge on any property purchase so you'd be paying it to reclaim it.
Everything that is supposed to be in heaven is already here on earth.
1 -
Thanks, the 5k I mentioned would be the total SDLT for the SPV buying the rented property. But would get approx 8k in SDLT refund so a net of 3k gainDoozergirl said:Companies also pay a 3% SDLT surcharge on any property purchase so you'd be paying it to reclaim it.
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