Stamp Duty on second home (first in UK)

slatav5

Hi, 

I am trying to work out how much stamp duty I will be liable to pay. 

I currently have a flat in Portugal in my name (my parents bought it and put it in my name about 8 years ago). They bought it for £60 000. 

I now want to buy a home with my partner here in the UK. The stamp duty on this is £8 400 as he is not a first time buyer. 

However, if it is seen as a second home the calculator is coming up with £29 800 in stamp duty. 

Having then done some further research, I am trying to work out whether the cost of the initial property makes any difference. I can see that the stamp duty for a second home went up from 3% to 5% in Oct this year. 

Would I be being taxed 5% on the value of the home in Portugal (5% of £60 000 =£3000) or would I be being charged 5% of the new property value plus £8400? 

For context, the Portugal flat is used as a holiday home by my parents. I have always lived in the UK and rented. The house in the UK will be my primary residence - would that make any difference either? 

Thank you

jonnydeppiwish!

5% on the uk property value.

anselld

Parents stitched you up there.  You could always transfer it back to them before buying.

artyboy

anselld said:

Parents stitched you up there.  You could always transfer it back to them before buying.

Or if for any reason they are not keen, the OP could always just sell it...

_Penny_Dreadful

slatav5 said:

Hi, 

I am trying to work out how much stamp duty I will be liable to pay. 

I currently have a flat in Portugal in my name (my parents bought it and put it in my name about 8 years ago). They bought it for £60 000. 

I now want to buy a home with my partner here in the UK. The stamp duty on this is £8 400 as he is not a first time buyer. 

However, if it is seen as a second home the calculator is coming up with £29 800 in stamp duty. 

Having then done some further research, I am trying to work out whether the cost of the initial property makes any difference. I can see that the stamp duty for a second home went up from 3% to 5% in Oct this year. 

Would I be being taxed 5% on the value of the home in Portugal (5% of £60 000 =£3000) or would I be being charged 5% of the new property value plus £8400? 

For context, the Portugal flat is used as a holiday home by my parents. I have always lived in the UK and rented. The house in the UK will be my primary residence - would that make any difference either? 

Thank you

You pay SDLT on the property you are purchasing, not the one you already own.

As the property n Portugal is worth over £40,000 Condition C for the higher rate of SDLT is met.  Therefore, for the purposes of SDLT you are purchasing an additional residential property so the higher rate of SDLT (an extra 5%) will apply to the total purchase price.

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09780

What you intend to do with the property in the UK (I'm assuming England since you talk of SDLT although it could be Northern Ireland) is irrelevant.  In simple terms you currently own one residential property and at the end of the transaction you will own two residential properties ergo you are purchasing an additional residential property.

One way to avoid the higher rate would be to dispose of your interest in the Portugal property before completing the purchase of your new home.

Another depends on your partner's situation.  If your partner is selling their main residence to purchase the new home then IF you were married you would not meet Condition D as you would be considered to by replacing your main residence and the Portuguese property would be discounted when determining the amount of SDLT due.

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800

It could be cheaper to pop down to the registry office with a couple of witnesses.

silvercar

I haven't a clue what a property bought for £60,000 in Portugal 8 years ago would be worth now, but if it is less than £40,000 it wouldn't count.

Also, is your partner not a first time buyer because they have recently sold their residential home, or because of historic ownership. If more than 3 years ago, it wouldn't count as replacing their main residence, so marrying wouldn't help the situation.

I don't know anything about Portugal's property laws, but if you could transfer ownership away from yourself it could save you money. 

SDLT_Geek

_Penny_Dreadful said:

slatav5 said:

Hi, 

I am trying to work out how much stamp duty I will be liable to pay. 

I currently have a flat in Portugal in my name (my parents bought it and put it in my name about 8 years ago). They bought it for £60 000. 

I now want to buy a home with my partner here in the UK. The stamp duty on this is £8 400 as he is not a first time buyer. 

However, if it is seen as a second home the calculator is coming up with £29 800 in stamp duty. 

Having then done some further research, I am trying to work out whether the cost of the initial property makes any difference. I can see that the stamp duty for a second home went up from 3% to 5% in Oct this year. 

Would I be being taxed 5% on the value of the home in Portugal (5% of £60 000 =£3000) or would I be being charged 5% of the new property value plus £8400? 

For context, the Portugal flat is used as a holiday home by my parents. I have always lived in the UK and rented. The house in the UK will be my primary residence - would that make any difference either? 

Thank you

You pay SDLT on the property you are purchasing, not the one you already own.

As the property n Portugal is worth over £40,000 Condition C for the higher rate of SDLT is met.  Therefore, for the purposes of SDLT you are purchasing an additional residential property so the higher rate of SDLT (an extra 5%) will apply to the total purchase price.

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09780

What you intend to do with the property in the UK (I'm assuming England since you talk of SDLT although it could be Northern Ireland) is irrelevant.  In simple terms you currently own one residential property and at the end of the transaction you will own two residential properties ergo you are purchasing an additional residential property.

One way to avoid the higher rate would be to dispose of your interest in the Portugal property before completing the purchase of your new home.

Another depends on your partner's situation.  If your partner is selling their main residence to purchase the new home then IF you were married you would not meet Condition D as you would be considered to by replacing your main residence and the Portuguese property would be discounted when determining the amount of SDLT due.

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800

It could be cheaper to pop down to the registry office with a couple of witnesses.

silvercar said:

I haven't a clue what a property bought for £60,000 in Portugal 8 years ago would be worth now, but if it is less than £40,000 it wouldn't count.

Also, is your partner not a first time buyer because they have recently sold their residential home, or because of historic ownership. If more than 3 years ago, it wouldn't count as replacing their main residence, so marrying wouldn't help the situation.

I don't know anything about Portugal's property laws, but if you could transfer ownership away from yourself it could save you money. 

I can build a bit on the parts in bold in the helpful posts above.

If your partner disposed of a property within the last three years, and the two of you were married (or in a civil partnership) at the time, and you had lived in that property as your only or main residence within the last three years (counting back from the time you complete the purchase in England), then things are looking better. 

If those conditions are met then I would expect you to be able to meet the conditions for the "replacement of main residence" rules, if you still own the Portuguese property when you complete your purchase in England. 

It is a matter of applying the set of five conditions in the guidance here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09800.