Extra 3% SDLT situation

stevetittle

My wife and I are looking at buying a larger house and keeping her smaller original house for letting.

She owns the property we are in at present outright and it is in her name only.

I sold my former main resistance which was solely in my name after we were married and moved in with her.

We are wondering if there is any way we can reduce the extra 3% sdlt payable on the new larger house whilst still keeping her original house?

I had erroneously thought that I could buy the new larger house solely in my name to avoid this extra charge but have recently discovered we can’t do this simply by virtue of the fact we are married and are treated as one for sdlt purposes.  Can we sign over the small house to our 2 year old son in trust?

We are not trying to avoid the tax but see it as unfair we can’t at least only pay the extra 3% sdlt on the smaller house when the new larger one becomes our new main residence.  The difference in value between her house and the new one is likely to be £400-500k so a potential £12-15k sdlt difference in extra sdlt.

It’s a lot of money to potentially save here so I thought it worth asking the question at least!  Or is there no way around this and should I go into the garden and start burning a stack of £50 notes?

user1977

stevetittle said:

Or is there no way around this 

Yes, there is a way around it. You sell the first house rather than keeping it. Otherwise, you pay your tax. If it's deterring you from buying an additional property, that was kinda the whole point of the tax...

Deedoodee

stevetittle said:

 Can we sign over the small house to our 2 year old son in trust?

We are not trying to avoid the tax

Places in these two phrases sequentially is a little funny…

The point of the tax is to deter people holding on to property instead of selling it. If you’re trying to find a way to do that and not pay the tax, how is that not trying to avoid the tax? 

TheJP

Tell me you want to avoid paying tax without telling me you want to avoid paying tax...

canaldumidi

I have taken on a 2nd job that is likely to push me into the higher rate income tax threshold.

I am considering giving the employer my 2 year old son's name and putting the income he receives into a trust for him.

I am not trying to avoid income tax.

TBG01

You're also not an accidental landlord are you?

Comptoncare

Have you actually used the government stamp duty calculator on their website. If you are replacing your main residence and your post suggests that you are, then you don't pay the 3% rate. Do the figures on the calculator.

SDLT_Geek

Comptoncare said:

Have you actually used the government stamp duty calculator on their website. If you are replacing your main residence and your post suggests that you are, then you don't pay the 3% rate. Do the figures on the calculator.

To be "replacing" a main residence requires a sale or other disposal of a previous home.  OP proposes to retain the old home.

Another example of misleading HMRC guidance, unfortunately.

Slithery

Comptoncare said:

If you are replacing your main residence and your post suggests that you are...

In SDLT terms 'replacing' means selling. If they are keeping the property that they currently live in and buying a new one then it isn't being replaced, they are buying an additional property which is exactly what the extra tax is meant to cover.

hannahcolobus

If you want to benefit from having two houses then you’ve got to pay for that privilege. 

If you don’t want to- sell it and let someone else have a chance of owning it.