Stamp duty

sushisub22

My son is renting the only house he owns. He has a certain amount of equity in it. He wants to remortgage it on a buy to let mortgage to raise a deposit for another house he will live in.

Total value of both houses comes to 450k or thereabouts. He has been told by a broker he will have 11.5k to pay in stamp duty... covering both houses. This includes 10k on the house he is renting and remortgaging. He paid stamp duty on it when he bought it in 2018.

He's not crying about it, he'll just pay and move on.

Will he need to pay stamp duty when he remortgages in the future?

Can anyone explain why he needs to pay stamp duty on a house he has owned already for 8 years?

GavCB

my understanding is that he’ll only pay stamp duty on the new house, at the higher rate, as it will become a second property. If he were to move into the rental and then sell it, he would pay the lower rate of SD on the new purchase. I’m confident that he won’t pay SD on the rental property as he already owns it. And no, SD is not payable on remortgages…..

user1977

Somebody has misunderstood (and playing Chinese whispers probably doesn't help…). His proposed purchase will be of an additional property, so the higher rate of SDLT (or equivalent) will apply. He isn't paying the stamp duty "on" the existing house, he's paying it on the new house because he also owns the existing house.

There is no stamp duty payable on remortgages, only purchases.

sushisub22

Thank you. I'm struggling to get my head around it.... no previous experience of this.

He is not purchasing the house he already owns yet he will be charged 10k on it when he remortgages it. Seems harsh. He will get it back if he sells this house within 3 years though.

user1977

https://forums.moneysavingexpert.com/discussion/comment/82101469#Comment_82101469

No, there is no refund if he sells the first house (unless it was his main residence within that 3 year period). The higher rate is payable on his purchase because he is increasing the number of properties he owns.

sherlock228

https://forums.moneysavingexpert.com/discussion/comment/82101469#Comment_82101469

i) he already owns a property. Where is he himself living at the moment given one assumes his property is occupied by tenants ?

ii) he will not be selling the let ("rented") property

iii) he will be buying ANOTHER property whilst retaining the old property

iv) At that point in time he will have gone from owning 1 property to simultaneously owning 2 properties
That automatically means he must pay the higher rate SDLT on the purchase cost of the "additional" property

To be facing an SDLT bill of about £11,500 means the purchase price of the additional property is £200,000.
That calculation is 5% on the first £125,000 ( = £6,250) then 7% on the remaining £75,000 (= £5,250) total SDLT £11,500

he is not paying SDLT on the property he already owns, he is paying it on the one he is buying

mortgage and re-mortgage is utterly irrelevant. SDLT is charged on the purchase price, not how you fund that cost using a mortgage.

To get a refund he must meet 2 criteria:
a) he MUST have lived in the sold ("old") property as his main home at some point within the 3 years leading up to the date of purchase of the new ("additional") property

and
b) he must have sold the old property within 3 years of purchasing the new ("additional" ) property which must be used as his main/only home

Does he pass both those criteria? If not, he will not get a refund.

(Bear in mind as the property has been let, depending on how long he has owned it and lived in it himself, he may need to pay Capital Gains Tax when he sells it given it has been "rented out" and so no longer gets CGT exemption)

sushisub22

Thanks.. it's beginning to sink in.

For the record he lived in the house he is now renting from 2018 to last year when work took him away elsewhere and he chose to rent it out.

sherlock228

https://forums.moneysavingexpert.com/discussion/comment/82101526#Comment_82101526

then I suggest your son starts educating himself on the implications of CGT and the rules around work related "absence" when / if he does sell it