Stamp duty on 2nd property, or is it?

ali1511

I sold a house last year and I’m currently renting.
Other half (not married) has a flat with a mortgage that he wants to rent out. Value c£100k

He’s unofficially living with me on a trial basis but hasn’t changed his address etc, although he will soon.

We are looking to buy a house together. Value £350k

We are both putting equal deposit into it.

If I take out the mortgage alone, I understand we won’t have to pay the extra SDLT as long as he isn’t on the deeds. Does this mean he cannot be on the electoral roll there or treat it as his main residence?

We know we need legal advice but if there isn’t a way to avoid the extra SDLT then we need a rethink

if I buy alone it’s £7500, if it’s joint it’s £25,000, which would have to be added onto the mortgage

thanks in advance

_Penny_Dreadful

https://forums.moneysavingexpert.com/discussion/6665893/stamp-duty-on-2nd-property-or-is-it

I’ll assume you’re in England where the applicable tax is SDLT.

SDLT is based on beneficial ownership rather than legal ownership. What is your boyfriend expecting for his share of the deposit? Presumably it’s not a no-strings-attached gift to you? If your boyfriend is hoping to get a beneficial share of the property then the higher rate of SDLT will apply.

Have you found a lender who will give you a mortgage solely in your name when part of the deposit is coming from someone who doesn’t want to be named on the mortgage but will live there?

SDLT_Geek

https://forums.moneysavingexpert.com/discussion/6665893/stamp-duty-on-2nd-property-or-is-it

It matters not a jot whether your partner is "on the deeds". What matters for SDLT is whether he has an underlying share in the property. That appears to be the intention here, with him putting in an equal deposit, so you would together need to budget for the extra 5% SDLT on the whole price.

The analysis would be different if any of the below apply:

(a) You could afford to buy the house alone.

(b) (it seems unlikely) the funds he puts in could be by way of gift or a loan (that might not work practically, nor with mortgage borrowing).

( c ) There is another property you haven't mentioned that he lived in within the last three years and which has been sold / disposed of.

(d) He decides not to keep the flat, but completes the sale of his flat before the joint purchase.

Emmia

Cynically from the boyfriends perspective, if he "gifts" you the deposit, is he waving goodbye to that money in the event the relationship ceases? And if the property is solely in your name...

If you're not married, then there's no divorce to go through with a formal financial settlement being an option if you part.

Personally, in this scenario if I was the boyfriend I'd be thinking very carefully about the possible ramifications of the relationship breaking down and what happens to my deposit, and especially what that deposit + mortgage contribution means in terms of a % share of the property.

If you want to avoid the higher rate of SDLT then he needs to sell the flat, and then you buy jointly with both names on the deeds / mortgage...

ali1511

Thanks for the responses

Yes we are in England.
He doesn’t want to sell the flat and I don’t want him to have to.
we would obviously have a legal document drawn up to protect our interests.

I was hoping that we could avoid the extra SDLT but it would appear not.

jamesmiller120

You’re right to question it, because with SDLT it’s less about names on the deeds and more about beneficial interest.

The key point is this: if your partner is contributing to the purchase (deposit or mortgage) and is intended to have any stake in the property, HMRC are likely to treat it as a joint purchase in substance, even if it’s only in your name on paper. In that situation, the higher rate could still apply because he already owns another property.

Simply keeping him off the deeds or electoral roll doesn’t automatically avoid the surcharge if the reality is that he has an interest.

The only clear way the standard rate would apply is if:

• you genuinely buy it in your sole name, and
• he has no beneficial interest at all (i.e. not contributing in a way that gives him a stake)

But that then creates its own issues around fairness, ownership, and what happens if things change later.

In practice, most people in your situation either:

• accept the higher rate and buy jointly, or
• have the existing property sold before purchase (if that’s an option)

Definitely worth getting proper advice before committing, as trying to “structure around” SDLT can backfire if HMRC look at the reality rather than the paperwork.

Caz3121

https://forums.moneysavingexpert.com/discussion/comment/81979868#Comment_81979868

Is it an option for him to agree to pay the additional SDLT (rather than share the cost of it) with the understanding that if there was to be any refund due in the future…he may decide being a landlord is not what he expects and sells within 3 years then he is the one that claims his money back

_Penny_Dreadful

https://forums.moneysavingexpert.com/discussion/comment/81980096#Comment_81980096

He won't quite have 3 years because he's already living with the OP. The OP can try and call it "unofficial" but the place the OP is renting is in fact his current main residence.