Second Home Stamp Duty understanding

DavidRoy51

Good afternoon,
I would like to understand my options regarding the Second Home Stamp Duty tax.
My partner and I (both single and not married) have a tenancy in common agreement on our current home (currently valued at £250k). This is our only home and it is owned outright, it is mortgage free.
My partner's mother passed away last year, leaving her father widowed. Since the passing, my partner has been visiting her father at least once per fortnight. The father lives over two hours drive away which is becoming costly to visit. She is also staying in B&Bs as there is no space in her father's property.

We've been discussing our options and one such option is to purchase a small property near her father that she/I can stay in when visiting. We have no reason to believe he won't be with us for another decade.
We are aware of the increased SDLT on second homes. I shall refer to the Second Home Stamp Duty tax as SHSDt. It is something that deters us from this pursing this path. However, we are not married and therefore I am wishing to understand if the SHSDt would be applicable to us if we follow the below course of action, in the order stated.
1) She writes a Will that has me as the sole beneficiary to her estate. I write a Will that has her as the sole beneficiary to my estate.
2) I formally/legally assign 100% of our current house to her and therefore I am no longer on any house deeds/land registry. Her, now, house is valued at £250k.
3) I take the £100k joint savings and take a mortgage out solely in my name. The new purchased house is valued at, say, £300k, minus the £100k deposit, leaving a £200k mortgage.
At this point, she is sole owner of a £250k home - mortgage free. I am an the sole owner (with the mortgage lender) of a £300k home which has £100k equity in it.

Question 1 - Would the above path negate the SHSDt for both of us?

Question 2 - As the purchasing of this second home is now complete and it was completed through me alone, would I then be able to go on my partner's home (our original) as joint owner, and she go on the new home (my home) as joint owner, like the tenancy in common arrangement we currently have? In follow-up this question, would there need to be an elapsed time period before this can take place, if not immediately? Would the second home have to be mortgage-free before she could be added to the deeds and me added to her deeds?

Question 3 - I understand the Inheritance Tax threshold is currently £325k. If my partner passed, and providing her estate is £325k or less (currently her home would be valued at £250k, and all her savings remain in a joint account with me, so they would not be subject to inheritance tax) then I would incur no inheritance tax on her estate?

Question 4 - If I passed, then providing the equity in this second home is £325k or less, she wouldn't incur any inheritance tax in receiving my estate (any savings of mine would be in a joint account with her, so would avoid inheritance tax).

I appreciate there is a moral concern here due to the investment aspect, but the driver here is to provide support for her father. We have discussed him coming to us but there is no space, it wouldn't be ideal, and he doesn't wish to leave his area. We would like be fully transparent with our intention and, of course, fully legal.

If this is an avenue that is available to us, who/which professional should we seek to kick-start this for us?
If you know of an alternative approach that would achieve our aim then please do share with me.

Best and regards,
D. Roy.

_Penny_Dreadful

DavidRoy51 said:

Good afternoon,
I would like to understand my options regarding the Second Home Stamp Duty tax.
My partner and I (both single and not married) have a tenancy in common agreement on our current home (currently valued at £250k). This is our only home and it is owned outright, it is mortgage free.
My partner's mother passed away last year, leaving her father widowed. Since the passing, my partner has been visiting her father at least once per fortnight. The father lives over two hours drive away which is becoming costly to visit. She is also staying in B&Bs as there is no space in her father's property.

We've been discussing our options and one such option is to purchase a small property near her father that she/I can stay in when visiting. We have no reason to believe he won't be with us for another decade.
We are aware of the increased SDLT on second homes. I shall refer to the Second Home Stamp Duty tax as SHSDt. It is something that deters us from this pursing this path. However, we are not married and therefore I am wishing to understand if the SHSDt would be applicable to us if we follow the below course of action, in the order stated.
1) She writes a Will that has me as the sole beneficiary to her estate. I write a Will that has her as the sole beneficiary to my estate.
2) I formally/legally assign 100% of our current house to her and therefore I am no longer on any house deeds/land registry. Her, now, house is valued at £250k.
3) I take the £100k joint savings and take a mortgage out solely in my name. The new purchased house is valued at, say, £300k, minus the £100k deposit, leaving a £200k mortgage.
At this point, she is sole owner of a £250k home - mortgage free. I am an the sole owner (with the mortgage lender) of a £300k home which has £100k equity in it.

Question 1 - Would the above path negate the SHSDt for both of us?

Question 2 - As the purchasing of this second home is now complete and it was completed through me alone, would I then be able to go on my partner's home (our original) as joint owner, and she go on the new home (my home) as joint owner, like the tenancy in common arrangement we currently have? In follow-up this question, would there need to be an elapsed time period before this can take place, if not immediately? Would the second home have to be mortgage-free before she could be added to the deeds and me added to her deeds?

Question 3 - I understand the Inheritance Tax threshold is currently £325k. If my partner passed, and providing her estate is £325k or less (currently her home would be valued at £250k, and all her savings remain in a joint account with me, so they would not be subject to inheritance tax) then I would incur no inheritance tax on her estate?

Question 4 - If I passed, then providing the equity in this second home is £325k or less, she wouldn't incur any inheritance tax in receiving my estate (any savings of mine would be in a joint account with her, so would avoid inheritance tax).

I appreciate there is a moral concern here due to the investment aspect, but the driver here is to provide support for her father. We have discussed him coming to us but there is no space, it wouldn't be ideal, and he doesn't wish to leave his area. We would like be fully transparent with our intention and, of course, fully legal.

If this is an avenue that is available to us, who/which professional should we seek to kick-start this for us?
If you know of an alternative approach that would achieve our aim then please do share with me.

Best and regards,
D. Roy.

SDLT is based on beneficial ownership rather than legal ownership.  Whilst you'd no longer be a legal owner of the house you live in you would still have a beneficial interest and you only get to live in the house on the proviso you purchase this second property for your partner to use whenever she wants.  On this basis I expect your plan to avoid the higher rate of SDLT for the purchase of additional residential properties to fail.

I'm not sure how easy it would be for you to obtain a mortgage using joint savings solely in your name for a property you will not occupy.

p00hsticks

I sympathise with the dilemma, I'm in a similar position where in order to visit my elderly parents a long distance away I now have to pay for us to stay in a hotel as they are no longer able to put us up.

However, I'd also suggest that if you haven't already done so , you really examine the maths - I had previously been in a position where I could stay at an otherwise unoccupied property and - even though no morgage or rental cost was involved - the running cost numbers really didn't stack up.  

In our area, from April council tax on second homes will be double the usual rate.  Buildings insurance is likely to be costly, with many exclusions and provisos, and any contents insurance would probably exclude any 'high value' items such as TVs etc. If visiting frequently, it wouldn't be realistic to drain the heating and water system, which means keeping the property at a minimum temperature all the time, adding to heating costs.

It may well be that negotiating a long term regular arrangement with a local hotel or b&B works out cheaper and less hassle.