Using a LISA when buying a porperty below market value

Aodan

Has anyone had any experience of using their LISA when the market value of the property being purchased is greater than what you are paying for it.  My parents are selling me their investment property at a concession so that we can afford to get on the ladder and purchase our first property.  The property is worth £520k and they are selling it to us for £450k in London and therefore  this is  a 'concessionary purchase'. We don't know if we can use our LISA as the market value of the property is greater than £450k which is the threshold.  We will not have to pay stamp duty as this is based on the price paid, not the value of the property but I cannot find any guidance on the situation that we find ourselves in relation to our LISA.  If we cannot use our LISA we cannot purchase as we would lose too much of our savings ... needed to reduce the mortgage.  My parents know and accept that they will pay capital gains on the full value and not what they are selling it to us for.

SDLT_Geek

Aodan said:

Has anyone had any experience of using their LISA when the market value of the property being purchased is greater than what you are paying for it.  My parents are selling me their investment property at a concession so that we can afford to get on the ladder and purchase our first property.  The property is worth £520k and they are selling it to us for £450k in London and therefore  this is  a 'concessionary purchase'.

We don't know if we can use our LISA as the market value of the property is greater than £450k which is the threshold.  We will not have to pay stamp duty as this is based on the price paid, not the value of the property but I cannot find any guidance on the situation that we find ourselves in relation to our LISA.  If we cannot use our LISA we cannot purchase as we would lose too much of our savings ... needed to reduce the mortgage. 

My parents know and accept that they will pay capital gains on the full value and not what they are selling it to us for.

Some stamp duty land tax will be due here.  At best, it will be £1,250.  At worst it could be more.  Here is why:

1.  Some lenders will insist the price shown on the transfer is £520,000.  If so, the SDLT will be worked out on that.  There is an article about that here: https://www.blakemorgan.co.uk/bank-of-mum-and-dad-concessionary-purchases/  So you will need to chose your lender carefully.

2.  First time buyers' relief is dependent on you intending to live in the property as your only or main residence.  Is this the case?  You describe it as an "investment property", suggesting it is let out.

3.  The thresholds for first time buyers relief are set to fall back to the usual level with effect from 1 April 2025.  So if the purchase gets delayed there will be more SDLT to pay.

Hoenir

The HMRC might take a keen interest if the transaction is conducted at undervalue. CGT is payable on the full Market Value not the consideration actually paid.  Shuts the loophole of mutually beneficial transactions between connected parties to avoid paying the full amount of tax due.