Land Transaction Tax (second property)

clueless_clever_clog

Hi, I have a slightly more complicated situation and hope someone may have some insight as I can't find the answers online.

I currently own a property with a family member that we lived in for 3 years after buying the property. I then purchased my family home and paid stamp duty land tax on the new property. The family member continued living there for 10 years and is now looking to move out. They can not afford the LTT on their new purchase (family home) and so need to sell to purchase their new home.

My 2 options are as follows.

1. Sell the property, proceeds split 50/50 and then I have to pay CGT on my share of the gain.
2. Buy them out and turn into a rental, remortgaging to put solely in my name and paying just below market value of 50% for their share.

I have not found any information specifically relating to LTT on the additional share of the property but assume that it would be the higher rate 5% on the amount paid for their share. Would the amount paid be scrutinised as below market value and to confirm the LTT would only be for the additional share not the entire property as am already joint owner.

If anyone knows About CGT, could you also point me in the direction of any information for reductions as it was my main residence for the first 3 years of owning.

Property is approx £195,000 value, owned as joint tenants, purchased for £86,000 purchased just over 12 years ago obviously in Wales.

A bit long winded but really appreciate any help.

SDLT_Geek

https://forums.moneysavingexpert.com/discussion/6664962/land-transaction-tax-second-property

If you buy in your relation's share then LTT would indeed be due at the higher rate, because you also own your family home where you live. I would expect the chargeable consideration to be worked out on the total of:

(a) What you pay your relation for the equity.

(b) Half of the existing mortgage (assuming you have have equal shares).

For example, if that comes to £97,000 (just under half of £195,000) then LTT on that level is calculated at 5%, so £4,850.

I would not expect the Welsh Revenue Authority to have a problem with that. It should be made clear on the documents that it is only a half share being bought.