Selling 1 house buying 2

planningtogo · 8 October 2016 at 6:58AM

Hi We plan to sell our house in London which is worth approx. £415k and move to an area where house prices are lower.
As I'll be retired then getting to work etc. will not be a problem.
We hope to buy a house for £250k and with the money left over buy another one for £150k for our daughter and her 2 children as at the moment they are on housing benefit so we just want them to live without claiming any benefit's as she will be able to pay gas / electric / council tax /food from her wages .
My question is what's the best way to do this regarding tax , when we move should 1 house be in my wife's name and the other house be in my name?
I don't want my daughters house to be in her name as her partner isn't very good with money :mad:and I want them to have the security of a permeation home.

agrinnall · 8 October 2016 at 9:34AM

The answer depends on what aspect of tax you are concerned about. If it's Inheritance Tax then there's not enough information to give an answer. One tax you will probably be liable for is the additional Stamp Duty on second homes, so you'd pay an extra 3% on the £150,000.

planningtogo · 8 October 2016 at 10:23AM

Yes as I'm not renting the other house out I thought I one house was in my name and the other in my wifes name would I only pay the normal stamp duty ?

p00hsticks · 8 October 2016 at 11:15AM

planningtogo wrote: »

Yes as I'm not renting the other house out I thought I one house was in my name and the other in my wifes name would I only pay the normal stamp duty ?

Married couples are treated as a single entity for the purposes of the new Stamp Duty rules

Pennywise · 8 October 2016 at 11:27AM

You'll be liable to capital gains tax on the property lived in by your daughter, being on the gain between final selling price and original purchase price (adjusted for other costs of buying & selling). You've never lived in it so there's no main residence or lettings relief.

In terms of capital gains tax, no benefit in one being owned by you and the other by your spouse - in fact, likely to be better if both owned jointly.

I'm sure others will advice on inheritance tax.

planningtogo · 8 October 2016 at 1:38PM

Oh no sounds like I cant win , If I have to pay the extra stamp duty there will not be enough money left over to buy a small house for daughter. Thanks for replying

uknick · 8 October 2016 at 1:52PM

One option could be to buy the house, pay the stamp duty and then rent it to your daughter under a standard lease agreement.

Fund the extra stamp duty with a short term loan and use the rental income to pay it off.

She will be able to continue claiming housing benefit and the other associated benefits as she will be considered a normal tenant.

When the loan is repaid she comes off benefits.

If your rental income is less than or equal to the loan payments required for the purchase then there will be no income tax implications.

A family member has this arrangement with their mother in law.

planningtogo · 8 October 2016 at 3:53PM

That's sounds like a good plan , can she still claim if the house is owned by a family member ? It would only be until extra stamp duty loan was paid up .
Thanks for your help

Bluebirdman_of_Alcathays · 8 October 2016 at 4:05PM

planningtogo wrote: »

That's sounds like a good plan , can she still claim if the house is owned by a family member ? It would only be until extra stamp duty loan was paid up .
Thanks for your help

Only if she is paying a market level of rent, and this can be evidenced by a contract.

uknick · 8 October 2016 at 4:14PM

For the last 15 years or so my brother's MIL has lived in a house owned by him and his wife. She's been the only tenant since they bought the house

I did question the legitimacy of this on here a couple of years ago, but the view seems to be, if the MIL didn't get housing benefit to live in the property someone else would.

You must have an arm's length contract as you would have for any other tenant. You may also have to convince the council your daughter will be treated as a normal tenant. The MIL's claim was originally rejected; my brother then met with the council and the claim was approved.

Bluebirdman_of_Alcathays · 8 October 2016 at 4:17PM

....and be prepared to evict if she stops paying the rent. The best advice is to not mix business and family - and being a landlord is a business.

Selling 1 house buying 2

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free