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  • Tax

    SDLT Query

    Hey guys,

    Long time listener, first time caller..

    I have a bit of a query on SDLT - background; wifey and I have main residential home and 2 rentals..

    We're looking to move house and what we thinks is: we may be looking to convert our main residence to buy to let, ie take out a BTL mortgage with some additional borrowing (within PRA limits and such).

    Then use the equity and some cash to put down a deposit on a new main resi.

    Now, does that mean we can pay the 'normal' rate of SDLT for the new home (as it would be our residential) or would it be classed as a second home?

    I'm obviously hoping the former - could anyone shed any light and confirm please..

    Thanks so much!

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    Hi Tee

    Sadly as you will be retaining the main residence albeit converting it to a B2L and buying another one you will have to pay the additional SDLT, sorry. The PPR relief is only available if you fully dispose of the PPR either immediately or within three years of the purchase of the new one (if the latter is the case you claim a refund for the higher SDLT paid).

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    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing, ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk

    I really had feared that - I was hoping there was almost a 'change or purpose' we could commit on the old main house for BTL..

    That's a shame as it's a pretty substantial increase in tax!

    Thanks for the response - much appreciated..!

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    You might be able to save a bit by selling the PPR you have now to a limited company you both own thus locking in any capital gain. You will pay the extra SDLT on that transaction but if the new one is significantly more expensive you will save paying the extra on that. You will have to factor in getting a LTD company mortgage and running the property though a company but you will probably remove future S24 issues and it will allow you to retain profits within the company without additional liability to tax if that is what you want.

    Just a thought but without knowing your whole situation it's tough to say whether it is the right approach for you and your circumstances.

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    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing, ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk


    Thanks again, and of course as you suggest it will only make sense if all of the numbers stack up..

    I'll run through those tonight!

    One question - would it also be fair to say that we could do this sale to a LTD within 3 years to get the higher additional home element of SDLT refunded - sounds reasonable and should be possible, would you agree in principle.

    Again this will just help run the numbers against different scenarios!

    Many thanks once again!

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    Yes theoretically that would work. Obviously there is no guarantee it will continue to work going forward but under today's tax law it would.

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    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing, ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk


    Many thanks again Chris for the replies and information - running the numbers and trying to see how best to cut it..

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    How much Stamp Duty Land Tax (SDLT) will you be paying on your next property investment purchase?

    Are you aware that there are several ways of reducing your SDLT liability?

    The 3% SDLT surcharge came into effect on from November 2015 for anyone that is buying a property £40,000 or more. This is also the case if you have a spouse or Joint Venture partners that becomes partly responsible for the mortgage at a later date.

    Article: https://www.optimiseaccountants.co.uk/add...e39tEyZNAY

    Please also note that if you are thinking of incorporating your property business into a limited company that the 3% SDLT surcharge also applies. However, there are ways of mitigating the standard rates of SDLT and the 3% SDLT surcharge by using our method of incorporation, which may be read in our article.

    Article: https://www.optimiseaccountants.co.uk/how...e39pkyZNAY

    There are ways to reduce SDLT and save on the SDLT surcharge, as we have identified in our articles:

    1 – This is a relief whereby you can take the total value of the property portfolio using the averaging method

    Article: https://www.optimiseaccountants.co.uk/red...e39rUyZNAY

    2 – Build a house instead of buy: when you buy a plot of land you pay SDLT on the value of the land only and no SDLT is payable on the completed home. In addition, vacant plots are often considered by HMRC as being liable for commercial rates of stamp duty rather than residential rates, and thus the 3% surcharge can be avoided

    Article: https://www.optimiseaccountants.co.uk/bea...e394EyZNAY

    3 – If you find a property investor that purchased properties in a limited company it may be better for you to buy the company rather than individual properties from the company. SDLT is charged on land and property. Buying shares in a company attracts a different level of tax with Stamp Duty (SD) at 0.5%

    Article: https://www.optimiseaccountants.co.uk/buy...e3940yZNAY

    4 – Commercial properties or buying flats above a shop. If you were to buy these types of properties you would pay the non-residential rates of SDLT and would not need to pay the 3% SDLT surcharge

    Article: https://www.optimiseaccountants.co.uk/bea...e4B9UyZNAY

    5 - Property developers will not pay SDLT on a purchase that has fallen through or on part exchange with a vendor:

    Article: https://www.optimiseaccountants.co.uk/pro...fsXQ0ycbBJ

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    Simon Misiewicz | Business Development Manager

    Optimise Accountants

    Telephone: 0115 939 4606

    website: http://www.optimiseaccountants.co.uk