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  • FIRST POST
    • szyblaszczyk
    • By szyblaszczyk 13th Jul 18, 9:15 AM
    • 81Posts
    • 2Thanks
    szyblaszczyk
    Tax-efficient way to buy first flat
    • #1
    • 13th Jul 18, 9:15 AM
    Tax-efficient way to buy first flat 13th Jul 18 at 9:15 AM
    Hello! I'm new in the group and have a few really urgent questions as my and my girflriend are in the middle of the process of buying post-auction flat for cash (about 35 000) as it wasn't sold.

    1. We are first time buyers. How should we buy first property to save on taxes? Privately or through limited company (for example?)?
    2. We are working in full-time job through agency. Should we buy together or seperately? Does it matter in terms of taxes?
    3. To sum up: can you recommend us the BEST way to save on taxes?

    We'd really aprreciate your help!
Page 1
    • tacpot12
    • By tacpot12 13th Jul 18, 10:31 AM
    • 1,380 Posts
    • 1,186 Thanks
    tacpot12
    • #2
    • 13th Jul 18, 10:31 AM
    • #2
    • 13th Jul 18, 10:31 AM
    Buying privately is the cheapest way to one property. A company might save you money once you start buying more than a couple of properties.

    It doesn't matter from a tax perspective whether you by jointly or alone. I would suggest you agree what will happen to the property and the money you have both invested in it if you ever split up. Talk to a solicitor about how you can make this a legally binding agreement under UK law.

    I can't think of any way to reduce tax when buying a property other than to avoid properties where stamp duty is payable.
    • sal_III
    • By sal_III 13th Jul 18, 10:36 AM
    • 644 Posts
    • 657 Thanks
    sal_III
    • #3
    • 13th Jul 18, 10:36 AM
    • #3
    • 13th Jul 18, 10:36 AM
    If this is your first property and you plan to live in it - just buy it privately, at 35'000 no SDLT is payable.

    If it's an investment that you plan to let out, you might want to look at buying it through a limited company. SDLT will be payable on the purchase, but you might "save" some tax on the rent in the future. And I say "save" as it's not exactly saving as "deferring" for a later date of your choosing when you decide to pay out dividends or spend the profit on another property.
    • szyblaszczyk
    • By szyblaszczyk 13th Jul 18, 10:38 AM
    • 81 Posts
    • 2 Thanks
    szyblaszczyk
    • #4
    • 13th Jul 18, 10:38 AM
    • #4
    • 13th Jul 18, 10:38 AM
    Sorry guys, I didn't mention it will be the investment property. Buy, renovate and sell within a few weeks/months.
    • hazyjo
    • By hazyjo 13th Jul 18, 10:45 AM
    • 10,885 Posts
    • 14,340 Thanks
    hazyjo
    • #5
    • 13th Jul 18, 10:45 AM
    • #5
    • 13th Jul 18, 10:45 AM
    Very unlikely anyone will get a mortgage on it if you've owned it for less than 6 months (longer with some lenders).
    2018 wins: Single Malt Whisky; theatre tickets; festival tickets; year of gin(!); shoes
    • sal_III
    • By sal_III 13th Jul 18, 11:10 AM
    • 644 Posts
    • 657 Thanks
    sal_III
    • #6
    • 13th Jul 18, 11:10 AM
    • #6
    • 13th Jul 18, 11:10 AM
    If plan to do this again in the near future, likely a limited company is the better option. If it's a one-off, for that amount, personally I wouldn't bother and just do it privately.
    • Pixie5740
    • By Pixie5740 13th Jul 18, 11:11 AM
    • 12,932 Posts
    • 18,591 Thanks
    Pixie5740
    • #7
    • 13th Jul 18, 11:11 AM
    • #7
    • 13th Jul 18, 11:11 AM
    How are you funding the purchase?
    • sal_III
    • By sal_III 13th Jul 18, 11:17 AM
    • 644 Posts
    • 657 Thanks
    sal_III
    • #8
    • 13th Jul 18, 11:17 AM
    • #8
    • 13th Jul 18, 11:17 AM
    How are you funding the purchase?
    Originally posted by Pixie5740
    With cash apparently
    my and my girflriend are in the middle of the process of buying post-auction flat for cash (about 35 000) as it wasn't sold.
    Originally posted by szyblaszczyk
    • macman
    • By macman 13th Jul 18, 11:17 AM
    • 42,686 Posts
    • 17,954 Thanks
    macman
    • #9
    • 13th Jul 18, 11:17 AM
    • #9
    • 13th Jul 18, 11:17 AM
    Just to clarify, neither you nor your girlfriend already own a property, or a share of a property, in the UK?
    And you do mean a price of 35K, not 350K?
    No free lunch, and no free laptop
    • Pixie5740
    • By Pixie5740 13th Jul 18, 11:25 AM
    • 12,932 Posts
    • 18,591 Thanks
    Pixie5740
    With cash apparently
    Originally posted by sal_III
    Yes but whose cash? The OP's? His girlfriend's? Both of them?
    • martindow
    • By martindow 13th Jul 18, 12:13 PM
    • 7,754 Posts
    • 4,428 Thanks
    martindow
    Often places are in an auction for a reason. Assuming it is 35k this could imply that the number of years on the lease is very low. The OP's scheme to quickly do it up and sell on at a profit might not succeed if prospective buyers can't get a mortgage on it.
    • kingstreet
    • By kingstreet 13th Jul 18, 12:19 PM
    • 34,127 Posts
    • 18,513 Thanks
    kingstreet
    I suggest seeking advice from an Accountant.

    You intend to be a professional property developer and need to understand not just how to own the property, but how to set up your business.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • szyblaszczyk
    • By szyblaszczyk 13th Jul 18, 3:52 PM
    • 81 Posts
    • 2 Thanks
    szyblaszczyk
    Why is it unlikely if we will own it for less than 6 months? That's very important what you wrote, please let us know. We never hear about such problem.

    Very unlikely anyone will get a mortgage on it if you've owned it for less than 6 months (longer with some lenders).
    Originally posted by hazyjo
    To others asking:
    I confirm, 35k.
    Lease is very long, 980 years left.
    Service charges are about 75 for a month.
    • foxy-stoat
    • By foxy-stoat 13th Jul 18, 4:07 PM
    • 2,667 Posts
    • 1,533 Thanks
    foxy-stoat
    We have been chatting on about buying a flat for a while now, have you found the right one yet?

    If you have never heard of such a problem about selling a property within 6 months of purchase then you need to do some more research on buying and selling property in the UK - when you sell within 6 months your buyer will find it difficult to get a mortgage on it.

    Have you factored in ERC and set up fees into your profit/loss on your business venture?

    https://forums.moneysavingexpert.com/showthread.php?t=5812585

    https://forums.moneysavingexpert.com/showthread.php?t=5834403

    https://forums.moneysavingexpert.com/showthread.php?t=5786333
    • hazyjo
    • By hazyjo 13th Jul 18, 4:24 PM
    • 10,885 Posts
    • 14,340 Thanks
    hazyjo
    Why is it unlikely if we will own it for less than 6 months? That's very important what you wrote, please let us know. We never hear about such problem.
    Originally posted by szyblaszczyk
    Weird that, as I'd already told you in the first link that foxy-stoat gave. They've also answered your question. It really is very basic stuff that you should be aware of as a 'property developer'. I would consider renting it out for a year if that's at all possible. Or pull out completely (unless you've exchanged, which I presume you haven't).
    2018 wins: Single Malt Whisky; theatre tickets; festival tickets; year of gin(!); shoes
    • szyblaszczyk
    • By szyblaszczyk 13th Jul 18, 4:28 PM
    • 81 Posts
    • 2 Thanks
    szyblaszczyk
    Somehow we missed that 6-months period, I just read more about it, thanks. Unlikely but not impossible. Anyway, not a big deal and there are still cash buyers. Some time for renovation, some time for finding a buyer. We can also rent it out for the short-term.
    • diggingdude
    • By diggingdude 13th Jul 18, 4:38 PM
    • 387 Posts
    • 495 Thanks
    diggingdude
    unless it needs alot of work be careful. those looking at renting a 35k - 50k property may not be the sort of tenant you want short term as you may end up losing money
    House Deposit - Target 20000 April 2019
    Current Savings - 10225 13121.22 14621.22 16021 17296
    • lincroft1710
    • By lincroft1710 13th Jul 18, 4:52 PM
    • 11,016 Posts
    • 9,348 Thanks
    lincroft1710
    If it's a 980 yr lease, suggests the flat is less than 20 yrs old and 35K is a very low price.
    • Slithery
    • By Slithery 13th Jul 18, 5:15 PM
    • 824 Posts
    • 1,298 Thanks
    Slithery
    We can also rent it out for the short-term.
    Originally posted by szyblaszczyk
    If by short term you mean that you'll want it back in less than a year then this isn't as possible as you may think.

    You can't serve an eviction notice to end earlier than 6 months into a tenancy, and then if the tenant doesn't want to leave it could take up to 40 additional weeks to legally get them out of the property.
    Last edited by Slithery; 13-07-2018 at 5:28 PM.
    • AnotherJoe
    • By AnotherJoe 13th Jul 18, 5:18 PM
    • 10,610 Posts
    • 12,144 Thanks
    AnotherJoe
    Very unlikely anyone will get a mortgage on it if you've owned it for less than 6 months (longer with some lenders).
    Originally posted by hazyjo
    If it was 35k then even after renovation a mortgage won't be needed by many.
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