Stamp duty issue

flambo33

Good morning,

I have a house that I currently rent out as a buy to let so it doesn't count as a residential property for myself but an investment. I've lived in my partner's house for 2 years and we're now going on the mortgage together, she paid stamp duty on her house when it was purchased but the solicitor has said I'll have to pay stamp duty on her house as it will be a second home for me. I know you have to pay stamp duty on investment properties so I accept that, however, I was expecting to pay it only on my rental property at a lower rate as the house value is less.

does anyone know where we stand or where I can find the proper and definitive information as I'm struggling to get an answer for our specific situation online?

thanks.

saajan_12

flambo33 said:

Good morning,

I have a house that I currently rent out as a buy to let so it doesn't count as a residential property for myself but an investment. - okay, so you paid normal stamp duty for that (0%, 2%, 5%, ..)? 
I've lived in my partner's house for 2 years and we're now going on the mortgage together, she paid stamp duty on her house when it was purchased but the solicitor has said I'll have to pay stamp duty on her house as it will be a second home for me. - yes, its the 2nd property you will own and you're not selling anything. You pay higher rate SDLT on the amount you're paying, ie any deposit you pay to partner + 50% of the mortgage balance. 

I know you have to pay stamp duty on investment properties so I accept that, however, I was expecting to pay it only on my rental property at a lower rate as the house value is less. - not quite.. you have to pay SDLT on all purchases. You pay higher rate (ie the extra 3%) on additional purchases regardless of the purpose. Then there's an exemption if you're moving house and selling your main residence, but you're not. 

does anyone know where we stand or where I can find the proper and definitive information as I'm struggling to get an answer for our specific situation online?

thanks.

The solicitor is correct, the higher SDLT is due on an additional purchase, regardless of purpose (unless you're also selling). Have you ever lived in the investment property, and any plans to sell? 
Otherwise yes you owe the higher SDLT, but only on 50% of the mortgage balance plus any deposit you pay to partner. 

flambo33

saajan_12 said:

flambo33 said:

Good morning,

I have a house that I currently rent out as a buy to let so it doesn't count as a residential property for myself but an investment. - okay, so you paid normal stamp duty for that (0%, 2%, 5%, ..)? 
I've lived in my partner's house for 2 years and we're now going on the mortgage together, she paid stamp duty on her house when it was purchased but the solicitor has said I'll have to pay stamp duty on her house as it will be a second home for me. - yes, its the 2nd property you will own and you're not selling anything. You pay higher rate SDLT on the amount you're paying, ie any deposit you pay to partner + 50% of the mortgage balance. 

I know you have to pay stamp duty on investment properties so I accept that, however, I was expecting to pay it only on my rental property at a lower rate as the house value is less. - not quite.. you have to pay SDLT on all purchases. You pay higher rate (ie the extra 3%) on additional purchases regardless of the purpose. Then there's an exemption if you're moving house and selling your main residence, but you're not. 

does anyone know where we stand or where I can find the proper and definitive information as I'm struggling to get an answer for our specific situation online?

thanks.

The solicitor is correct, the higher SDLT is due on an additional purchase, regardless of purpose (unless you're also selling). Have you ever lived in the investment property, and any plans to sell? 
Otherwise yes you owe the higher SDLT, but only on 50% of the mortgage balance plus any deposit you pay to partner. 

I had just thought stamp duty was per property not per person, and as this was not a new purchase just a change of borrower on the mortgage it would be covered on the new house, especially as she has paid it in the past & I would have to pay it on the rental. I lived in my rental property 2 years ago but it has been a buy-to-let for 2 years, no plans to sell at present. As she'll be coming onto the buy to let will she be responsible for any of the additional stamp duty or is likely to be charged any on her property?

MEM62

flambo33 said:

I've lived in my partner's house for 2 years and we're now going on the mortgage together, she paid stamp duty on her house when it was purchased but the solicitor has said I'll have to pay stamp duty on her house as it will be a second home for me. 

My experience was different.  When my (now) wife and I first moved in together, we bought our house in her name only and I kept my previous property.  When our mortgage deal expired and we had to re-mortgage, on paper she struggled with affordability being a small business owner in the middle of COVD lockdown.  So we took a joint mortgage at that stage based on my income and the house went into joint names.  There was no additional stamp duty because I still owned my previous property.      

housebuyer143

The stamp duty is due if you acquire an interest in another property, so you going onto the deeds for your partners house, assuming a 50% share, means you are liable for stamp duty and the additional rate on 50% of the property value, I.e half the mortgage amount and whatever deposit you give her. 

If you add her to your BTL, she will have to pay stamp duty on it and the additional assuming her share is £40k or more.

SDLT_Geek

flambo33 said:

saajan_12 said:

flambo33 said:

Good morning,

I have a house that I currently rent out as a buy to let so it doesn't count as a residential property for myself but an investment. - okay, so you paid normal stamp duty for that (0%, 2%, 5%, ..)? 
I've lived in my partner's house for 2 years and we're now going on the mortgage together, she paid stamp duty on her house when it was purchased but the solicitor has said I'll have to pay stamp duty on her house as it will be a second home for me. - yes, its the 2nd property you will own and you're not selling anything. You pay higher rate SDLT on the amount you're paying, ie any deposit you pay to partner + 50% of the mortgage balance. 

I know you have to pay stamp duty on investment properties so I accept that, however, I was expecting to pay it only on my rental property at a lower rate as the house value is less. - not quite.. you have to pay SDLT on all purchases. You pay higher rate (ie the extra 3%) on additional purchases regardless of the purpose. Then there's an exemption if you're moving house and selling your main residence, but you're not. 

does anyone know where we stand or where I can find the proper and definitive information as I'm struggling to get an answer for our specific situation online?

thanks.

The solicitor is correct, the higher SDLT is due on an additional purchase, regardless of purpose (unless you're also selling). Have you ever lived in the investment property, and any plans to sell? 
Otherwise yes you owe the higher SDLT, but only on 50% of the mortgage balance plus any deposit you pay to partner. 

I had just thought stamp duty was per property not per person, and as this was not a new purchase just a change of borrower on the mortgage it would be covered on the new house, especially as she has paid it in the past & I would have to pay it on the rental. I lived in my rental property 2 years ago but it has been a buy-to-let for 2 years, no plans to sell at present. As she'll be coming onto the buy to let will she be responsible for any of the additional stamp duty or is likely to be charged any on her property?

It sounds as if this is a "land exchange" for SDLT purposes, with you receiving a share in your partner's property in return for you receiving a share in hers.

In that case the "chargeable consideration" for each of you is likely to be the market value of the interest you receive.  Has your solicitor advised you of this.

Having established the "chargeable consideration" the next question for each of you is the rate of SDLT applicable, especially whether the 3% surcharge for additional properties applies.  It seems likely that the 3% surcharge will apply to each acquisition.

Edit to add: As @saajan_12 says, the 3% surcharge analysis will be different if you and your partner are married or civil partners. 

saajan_12

flambo33 said:

saajan_12 said:

flambo33 said:

Good morning,

I have a house that I currently rent out as a buy to let so it doesn't count as a residential property for myself but an investment. - okay, so you paid normal stamp duty for that (0%, 2%, 5%, ..)? 
I've lived in my partner's house for 2 years and we're now going on the mortgage together, she paid stamp duty on her house when it was purchased but the solicitor has said I'll have to pay stamp duty on her house as it will be a second home for me. - yes, its the 2nd property you will own and you're not selling anything. You pay higher rate SDLT on the amount you're paying, ie any deposit you pay to partner + 50% of the mortgage balance. 

I know you have to pay stamp duty on investment properties so I accept that, however, I was expecting to pay it only on my rental property at a lower rate as the house value is less. - not quite.. you have to pay SDLT on all purchases. You pay higher rate (ie the extra 3%) on additional purchases regardless of the purpose. Then there's an exemption if you're moving house and selling your main residence, but you're not. 

does anyone know where we stand or where I can find the proper and definitive information as I'm struggling to get an answer for our specific situation online?

thanks.

The solicitor is correct, the higher SDLT is due on an additional purchase, regardless of purpose (unless you're also selling). Have you ever lived in the investment property, and any plans to sell? 
Otherwise yes you owe the higher SDLT, but only on 50% of the mortgage balance plus any deposit you pay to partner. 

I had just thought stamp duty was per property not per person, and as this was not a new purchase just a change of borrower on the mortgage it would be covered on the new house, - as far as your tax affairs are concerned, its a new asset you're acquiring. What anyone else owned before is irrelevant, whether a 3rd party or joint purchaser. You wouldn't expect SDLT to be paid once when the house was built only?!
In order to become a joint borrower, the lender will need you to also own the security, ie go on the deeds of the property, hence you're buying a share into the property. You're becoming responsible for 50% of the mortgage, ie effectively paying 50% of the mortgage balance. 
especially as she has paid it in the past & I would have to pay it on the rental. - how would you have paid it on the rental? SDLT is only  due at purchase, so you'd have paid the normal SDLT as it was your first purchase, but not the 3% extra and nothing extra for the change of use. 
I lived in my rental property 2 years ago but it has been a buy-to-let for 2 years, no plans to sell at present. As she'll be coming onto the buy to let will she be responsible for any of the additional stamp duty or is likely to be charged any on her property?- if she also buys part of your rental, then she'll have to pay higher rate SDLT on whatever she pays you plus whatever part of the mortgage she takes responsibility for. 

Comments in line, assuming you're not married. If you are, then the situation may differ. Whats your rationale for doing this - any reason you can't individually own the 2 properties? 

flambo33

saajan_12 said:

flambo33 said:

saajan_12 said:

flambo33 said:

Good morning,

I have a house that I currently rent out as a buy to let so it doesn't count as a residential property for myself but an investment. - okay, so you paid normal stamp duty for that (0%, 2%, 5%, ..)? 
I've lived in my partner's house for 2 years and we're now going on the mortgage together, she paid stamp duty on her house when it was purchased but the solicitor has said I'll have to pay stamp duty on her house as it will be a second home for me. - yes, its the 2nd property you will own and you're not selling anything. You pay higher rate SDLT on the amount you're paying, ie any deposit you pay to partner + 50% of the mortgage balance. 

I know you have to pay stamp duty on investment properties so I accept that, however, I was expecting to pay it only on my rental property at a lower rate as the house value is less. - not quite.. you have to pay SDLT on all purchases. You pay higher rate (ie the extra 3%) on additional purchases regardless of the purpose. Then there's an exemption if you're moving house and selling your main residence, but you're not. 

does anyone know where we stand or where I can find the proper and definitive information as I'm struggling to get an answer for our specific situation online?

thanks.

The solicitor is correct, the higher SDLT is due on an additional purchase, regardless of purpose (unless you're also selling). Have you ever lived in the investment property, and any plans to sell? 
Otherwise yes you owe the higher SDLT, but only on 50% of the mortgage balance plus any deposit you pay to partner. 

I had just thought stamp duty was per property not per person, and as this was not a new purchase just a change of borrower on the mortgage it would be covered on the new house, - as far as your tax affairs are concerned, its a new asset you're acquiring. What anyone else owned before is irrelevant, whether a 3rd party or joint purchaser. You wouldn't expect SDLT to be paid once when the house was built only?!
In order to become a joint borrower, the lender will need you to also own the security, ie go on the deeds of the property, hence you're buying a share into the property. You're becoming responsible for 50% of the mortgage, ie effectively paying 50% of the mortgage balance. 
especially as she has paid it in the past & I would have to pay it on the rental. - how would you have paid it on the rental? SDLT is only  due at purchase, so you'd have paid the normal SDLT as it was your first purchase, but not the 3% extra and nothing extra for the change of use. 
I lived in my rental property 2 years ago but it has been a buy-to-let for 2 years, no plans to sell at present. As she'll be coming onto the buy to let will she be responsible for any of the additional stamp duty or is likely to be charged any on her property?- if she also buys part of your rental, then she'll have to pay higher rate SDLT on whatever she pays you plus whatever part of the mortgage she takes responsibility for. 

Comments in line, assuming you're not married. If you are, then the situation may differ. Whats your rationale for doing this - any reason you can't individually own the 2 properties? 

Our motives are financial & as a family, we want to have a joint share in things, I want the money I'm paying her to count for something and vice versa, we would like to extend our current house (hers) and these things only become affordable for us if we're on the mortgage together.

ok, I did not realize it was an individual tax rather than a property tax, so what we're looking at is me paying SDLT going onto her mortgage and deeds for the house as we've discussed with the solicitor. But to clarify then, when she goes onto my mortgage & deeds she will also have to pay her share of SDLT on my property? ouch, this is going to cost us a small fortune to move forward together! is there anything we can do to lower the cost or avoid it, what about having a legal document drawn up to guarantee her a financial share in my property without going onto the mortgage/deeds?

thanks for all the responses so far, it has been very helpful and has helped me to understand the SDLT a little clearer!

_Penny_Dreadful

flambo33 said:

saajan_12 said:

flambo33 said:

saajan_12 said:

flambo33 said:

Good morning,

I have a house that I currently rent out as a buy to let so it doesn't count as a residential property for myself but an investment. - okay, so you paid normal stamp duty for that (0%, 2%, 5%, ..)? 
I've lived in my partner's house for 2 years and we're now going on the mortgage together, she paid stamp duty on her house when it was purchased but the solicitor has said I'll have to pay stamp duty on her house as it will be a second home for me. - yes, its the 2nd property you will own and you're not selling anything. You pay higher rate SDLT on the amount you're paying, ie any deposit you pay to partner + 50% of the mortgage balance. 

I know you have to pay stamp duty on investment properties so I accept that, however, I was expecting to pay it only on my rental property at a lower rate as the house value is less. - not quite.. you have to pay SDLT on all purchases. You pay higher rate (ie the extra 3%) on additional purchases regardless of the purpose. Then there's an exemption if you're moving house and selling your main residence, but you're not. 

does anyone know where we stand or where I can find the proper and definitive information as I'm struggling to get an answer for our specific situation online?

thanks.

The solicitor is correct, the higher SDLT is due on an additional purchase, regardless of purpose (unless you're also selling). Have you ever lived in the investment property, and any plans to sell? 
Otherwise yes you owe the higher SDLT, but only on 50% of the mortgage balance plus any deposit you pay to partner. 

I had just thought stamp duty was per property not per person, and as this was not a new purchase just a change of borrower on the mortgage it would be covered on the new house, - as far as your tax affairs are concerned, its a new asset you're acquiring. What anyone else owned before is irrelevant, whether a 3rd party or joint purchaser. You wouldn't expect SDLT to be paid once when the house was built only?!
In order to become a joint borrower, the lender will need you to also own the security, ie go on the deeds of the property, hence you're buying a share into the property. You're becoming responsible for 50% of the mortgage, ie effectively paying 50% of the mortgage balance. 
especially as she has paid it in the past & I would have to pay it on the rental. - how would you have paid it on the rental? SDLT is only  due at purchase, so you'd have paid the normal SDLT as it was your first purchase, but not the 3% extra and nothing extra for the change of use. 
I lived in my rental property 2 years ago but it has been a buy-to-let for 2 years, no plans to sell at present. As she'll be coming onto the buy to let will she be responsible for any of the additional stamp duty or is likely to be charged any on her property?- if she also buys part of your rental, then she'll have to pay higher rate SDLT on whatever she pays you plus whatever part of the mortgage she takes responsibility for. 

Comments in line, assuming you're not married. If you are, then the situation may differ. Whats your rationale for doing this - any reason you can't individually own the 2 properties? 

 ouch, this is going to cost us a small fortune to move forward together! is there anything we can do to lower the cost or avoid it, what about having a legal document drawn up to guarantee her a financial share in my property without going onto the mortgage/deeds?

SDLT is based on beneficial interest not legal interest so getting a legal document drawn up that gives you a beneficial interest is not going to help.  The legal document that will help is a marriage certificate.