Minimising stamp duty??

will_yateley · 7 August 2018 at 1:37PM

Hello all, first post on here, so bare with me ...
I have a property in my name with no mortgage.
I have a few others that I rent out.
My wife has no properties in her name.
We want to buy a bigger house but keep our current one to rent it out.
I need to re-mortgage (BTL) the current house to raise funds for the deposit for the new house (approx. 200k).
What's my best way to minimise stamp duty on the whole transaction?
If my wife buys the new house in her name only but with a deposit gifted from me, would I pay stamp duty on the capital raised from the re-mortgage?
If the new house is in her name but I plan to live there, does she lose the low stamp duty rights and we have to pay 'additional property rates' of stamp duty?

If I get a sole proprietor dual income mortgage with the new house in her name, and myself as the additional borrower, could she then pay the lower rates of stamp duty? Not sure how this works with married couples.

My solicitor doesn't know the answers and my mortgage broker has lots of products to offer but needs the legal nod to go ahead, so I don't get caught out with an unexpected bill at the end.

Any advice on this would be greatly appreciated.

Typhoon2000 · 7 August 2018 at 2:29PM

If you are married then your are-treated as one unit when it come to additional stamp duty. So if your wife buys her first house on her own with her own money, she will have to pay additional stamp duty if you retain your current main residence.

sparkey1 · 7 August 2018 at 2:34PM

Possible solution for you.

Form a limited company. This gets around clause 24.

Sell the house you live in, to the company, and let the company let it out. Yes the company will have to pay stamp duty or the house with the additional 3%. On the same day, both of you move out, and into a new home. You wont then be required to pay the additional 3 per cent stamp duty as you have disposed of your old home, and changed your residence. Just normal stamp. Depending on how much you sell your old home for, and what you buy there could be quite a difference in stamp duty, if you had done it without selling your old home.

The sole proprietor route will not save you stamp duty on the new purchase. It will also lessen your chances of getting a mortgage as there are few lenders that entertain it.

Typhoon2000 · 7 August 2018 at 2:43PM

However, as you are introducing your own house into your letting bussiness your are at a tremendous financial advantage when it comes to tax relief on interest costs. Your property is introduced at its current value, not the original purchase price.

So if your house is valued at £400k, and your new place is say £500k; you Mortgage your old place for £200k by way of a BTL mortgage Touse towards a depojsit for the new place, and get a £300k Mortgage on your new place, your interest costs on the BTL is the full £400k ( £200k BTL loan and £200k main home loan).

So even when S24 kicks in full in 3 years time, you can effectively still claim on the full £200k borrowed for the BTL. Till that time you are better off then a lower tax rate punter or a limited company.

sparkey1 · 7 August 2018 at 2:51PM

Would be useful if we knew your estimated purchase price for the new house, and the value of the old house.

will_yateley · 9 August 2018 at 7:06AM

Thanks for the replies so far, everyone and sorry for the late response.

Firstly, if I sold my current house to a ltd company, I'd have to pay capital gains as well, so would be costly in the short term.
And because I own a few flats as well, I still wouldn't be back on the lower rates. If as Typhoon says above, a married couple are treated as one, this wouldn't allow me to get around it.

Just for a bit more detail ...
Bought the current house in 2000 for 123k.
Now valued approx. 350k.
No mortgage on current house.
I have 6 flats that I let out, 5 of which have BTL mortgages.
New house 550k.
I was going to re-mortgage the current house for about 230 on BTL.
Then add approx. 50k from savings.
Mortgage on new place approx. 270.
Stamp duty on 550 is 34k full rates or 17.5 as a first purchase.
The 16.5 saved would allow me to reduce the mortgage and further reduce the SD.

Hope that makes it clearer. Any top tips would be greatly appreciated.

haras_nosirrah · 9 August 2018 at 7:39AM

I am afraid that there is no way around it. You will be paying the higher rate stamp duty as you own multiple properties. It is people like yourself the legislation was designed to catch.

If you want to keep your other properties you will have the pay the additional taxes associated with the transaction.

Pixie5740 · 9 August 2018 at 7:48AM

will_yateley wrote: »

Thanks for the replies so far, everyone and sorry for the late response.

Firstly, if I sold my current house to a ltd company, I'd have to pay capital gains as well, so would be costly in the short term.
And because I own a few flats as well, I still wouldn't be back on the lower rates. If as Typhoon says above, a married couple are treated as one, this wouldn't allow me to get around it.

Just for a bit more detail ...
Bought the current house in 2000 for 123k.
Now valued approx. 350k.
No mortgage on current house.
I have 6 flats that I let out, 5 of which have BTL mortgages.
New house 550k.
I was going to re-mortgage the current house for about 230 on BTL.
Then add approx. 50k from savings.
Mortgage on new place approx. 270.
Stamp duty on 550 is 34k full rates or 17.5 as a first purchase.
The 16.5 saved would allow me to reduce the mortgage and further reduce the SD.

Hope that makes it clearer. Any top tips would be greatly appreciated.

You wouldn't have to pay CGT if you sold your current home to a limited company because you'd be entitled to PRR. You would however lose the benefit of PRR further down the line should you eventually dispose of the property. Not that I think selling the property to a limited company would be of much benefit anyway.

The upshot is that if you want to avoid paying the higher rate of SDLT when you purchase your new home you will need to sell your current home before/at the same time as buying the new one or if you sell it within 3 years of buying your new home you can claim back the additional SDLT.

If you're not prepared to sell your current home then you're just going to have to suck up the higher rate.

haras_nosirrah · 9 August 2018 at 8:08AM

Pixie5740 wrote: »

You wouldn't have to pay CGT if you sold your current home to a limited company because you'd be entitled to PRR. You would however lose the benefit of PRR further down the line should you eventually dispose of the property. Not that I think selling the property to a limited company would be of much benefit anyway.

The upshot is that if you want to avoid paying the higher rate of SDLT when you purchase your new home you will need to sell your current home before/at the same time as buying the new one or if you sell it within 3 years of buying your new home you can claim back the additional SDLT.

If you're not prepared to sell your current home then you're just going to have to suck up the higher rate.

Not just their main home - they would have to sell the 6 btl flats as well

will_yateley · 9 August 2018 at 11:10AM

so if my wife bought the new house in her name only, how much less SD would I pay (roughly)?
And would this still not count as we're married and treated as one?
And would we also get hit because the money for the deposit is raised from another property?

TrickyDicky101 · 9 August 2018 at 11:24AM

You need to sell your current residential property to make any savings - that would then save you the 3% additional rate SDLT (which is what Pixie has already told you).

Minimising stamp duty??

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