Buying a second property

MazJ11

My husband and I want to buy a property to live in and rent out our current residence.  I am aware of the 4% tax payable on buying a second property (we are in Scotland).  We will not be mortgaging any of the properties and the new property will be of higher value than our existing one.  As we plan to live in the new property, our existing home will become the second property.  I am unclear of the tax inplications attached to this scenario.  Also I inherited 50% of our current home and bought the other 50% from my siblings.  Any info on this greatly appreciated.

user1977

Which tax implications were you wondering about? As you appear to know, there will be 4% 6% LBTT Additional Dwelling Supplement on the purchase price of the new property. You'll potentially have capital gains tax start to apply on the existing property once the main residence exemption ends, and income tax on the rent. I can't see it makes a difference how you acquired the current property. Mortgages wouldn't change things.

theartfullodger

Income tax payable on rent income - less claimable expenses, and CGT - but V unlikely the CGT bill (when you eventually sell the rented property) will be based on CGT current rules (they keep changing).

Strongly (STRONGLY!) you join SaL 
https://scottishlandlords.com/why-join-sal/
- membership fee claimable

& do the course from LaS on being a landlord.
https://scottishlandlords.com/resources/las-online-training-247/

Much much cheaper (time & money) than the alternative (ignorance...)

Artful: Landlord since 2000. started in Scotland, thought I knew everything - oh my stupidity, oh my hubris!  Ended up with a long-drawn out, complex, tricky, painful & expensive set of problems...please don't make my mistake!

Slàinte mhath!

SDLT_Geek

MazJ11 said:

My husband and I want to buy a property to live in and rent out our current residence.  I am aware of the 4% tax payable on buying a second property (we are in Scotland).  We will not be mortgaging any of the properties and the new property will be of higher value than our existing one.  As we plan to live in the new property, our existing home will become the second property.  I am unclear of the tax inplications attached to this scenario.  Also I inherited 50% of our current home and bought the other 50% from my siblings.  Any info on this greatly appreciated.

The "Additional Dwellings Supplement" to LBTT in Scotland is now 6% (not 4%).

_Penny_Dreadful

As others have pointed out, the ADS is 6% not 4%.

I'm not sure if you have any experience of being a landlord in Scotland.  The Cost of Living (Tenant Protection) Scotland Act 2022 only came to an end 31st March.  It essentially prevented the enforcement of most evictions from 6th October 2022 to 31st March 2024, and capped rent increases at 0% until 31st March 2023 when landlords were then able to increase the rent by a whopping 3%.  Come 1st April 2024 the sounds of rent increase notices hitting the doormat could be heard across Scotland.

This was all of the back off the COVID-19 special measures.  Now there's the Housing (Scotland) Bill making its way through the Scottish Parliament.  Rent controls, more protection from evictions, tenants being able to modify the property and have pets.  I'm not saying don't do it but you need to go into becoming a landlord in Scotland with your eyes wide open.  Get yourself educated or you could find yourself with an absolute howler of a tenant that is very difficult to evict.

The silver lining is that all this legislation has caused some landlords to start selling up which means fewer rental properties available which means higher rents for those of us who are sticking around.  Not so good news for people looking for a new home to rent though.