Stamp Duty Land Tax... An additional 3%!

[bdh198]

So, from April 2016 if you are buying a second, or additional, property for £300,000 and if you are not a 'corporate buyer' (not sure how that is defined exactly) then you will be effectively paying 4.7% SDLT (1.7% + the additional 3%). That's an SDLT tax bill of £14,000! And in London, you'll just about get a one bed flat for £300,000.

In those circumstances, is there any advantage of owning any future purchases as a Ltd company, i.e. a different company owning each new property purchase. It's messy and complicated, but will save a lot of SDLT (not to mention the savings from avoiding the restrictions to interest rate relief)?

[Carryon Regardless]

If we change use of our own home and start to rent it out is that considered a purchase liable for stamp duty? I don't think so.

There would be a saving if as BTL LL's we do this on a few.

I don't actually have interest on more prblems, sorry BTL purchases, but it's interesting to see if the designer has foreseen this.

[Richlist]

I see it only as a good thing.....

1. It's likely over time to result in less rental properties being available. As the demand for rental property is only ever likely to increase then so will rents. 

2. It will have little effect on the lower end of the market e.g. £125K = no sdlt  £150K = £1250 sdlt. I remember when I bought a flat for £89K and paid nearly £1000 in stamp duty so it just seem like old times again for me.

3. The country needs to get their finances in order and nothing but nothing is exempt. We need to get the deficit down not carry on growing it with a Labour government.

4. The biggest beneficiaries are likely to be the social landlords who rent low end properties.

5. This tax change is bad news for tenants.

[Carryon Regardless]

I hadn't considered the different angle RL.

I can see 5.

Surely 4. contradicts 2. Also I'm trying to see how 4. is relevant.

[Melboy]

I can see a surge in buying BTL property before next April.

[Richlist]

What I mean with point 4 is social landlords who rent low end properties valued @ less than £125K will get the benefit of ever increasing rents. But they won't face the downside of having to put more effort into selling or lowering the price because of the 5% sdlt. So points 4 & 2 don't contradict themselves.

Point  4 is relevant. My post was headed......I only see it as a good thing. ......Well it certainly is a good thing if you own rental property valued under £125K, of which there are many....... ever increasing rents and, no sdlt payable by your buyer so these properties become ever more desirable.

Even if you sell a property for £150K it's only £1250 for sdlt which is easy to negotiate away.

As I see it it's gonna be a lower value property boom time........obviously that doesn't include London and some of the bigger inner city areas but there are hundreds of thousands of properties in this country under £150K.

I see it as a positive for my portfolio.

Mind you, if i were sitting on a portfolio of properties each valued at the national  average of around  £250K I'd be considerably more concerned.

[Melboy]

 

As I see it it's gonna be a lower value property boom time........obviously that doesn't include London and some of the bigger inner city areas but there are hundreds of thousands of properties in this country under £150K.

 

Exactly RL. Welcome to my World.  Mind you with the rapid house price increase over the past year I can see my Sunseeker yacht sailing in on the horizon. 

[Richlist]

There is a chance that these plans will be modified before introduction in April 2016 as a result of input during the government's consultation period.

[Melboy]

A property "expert"  speaking on the TV last night endorsed what you have said RL. The lower end properties like flats will see a surge in value up until April as investor's rush to beat the tax deadline.

[Richlist]

It seems I got some of my numbers wrong.....hardly surprising due to the absolutely poor reporting of the subject by the media. Yesterday's Daily Mail report on html tax increases was really, really poor. I'm convinced the journalists are rubbish at maths cos most of the time they can't count and leave out important information. No mention in yesterday's Mail about the extra 3% btl tax kicking in over £50K.......the reader was left to guess that part.

So it does seem that the only safe place to be is sitting on a portfolio of property valued at £125K or less as there is still no sdlt on these.

Otherwise, even a property sold as 2nd home for £130K has sdlt of £4K

[Richlist]

Today's newspaper provides an example of 2 bed house in Leeds valued at £185,000 being sold as 2nd home.....Current sdlt = £1200 new sdlt = £6750

I guess all that's going to happen is that the seller will either

1) Sell to a first time buyer/ home occupier at the asking price of £185,000 or

2) Sell to an investor by offering to split the stamp duty i.e. sale price £182,000 (so buyer pays £182,000 + £6750 = £188750).

In any event the sums of money involved are not that large in terms of percentages £3000 represents just 1.6% of £185,000.

So on average buy to let prices (national btl average is £184,000)..... it really isn't that much of an issue.

But it does become a much bigger problem for the higher value properties where the buyer will have to find a conventional owner occupier buyer if they want to achieve anything near to the value/ asking prices.

[kanrent]

After 2016 i will be exchanging my 300,000 pound rental property with my friend for his 300,000 pound property to rent out so i will assume i will be stung for the additional 3%,  my question is what happens if i decide to live in the new house that i have just exchanged as my only and main resident's for say 6 months  and then decide to rent it out after the 6 months,  i live with my sister so i only have 1 property at a time will i be able to advoid the additinal 3% tax

[kanrent]

So, from April 2016 if you are buying a second, or additional, property for £300,000 and if you are not a 'corporate buyer' (not sure how that is defined exactly) then you will be effectively paying 4.7% SDLT (1.7% + the additional 3%). That's an SDLT tax bill of £14,000! And in London, you'll just about get a one bed flat for £300,000.

In those circumstances, is there any advantage of owning any future purchases as a Ltd company, i.e. a different company owning each new property purchase. It's messy and complicated, but will save a lot of SDLT (not to mention the savings from avoiding the restrictions to interest rate relief)?

to define  "crporate" means very large company's this goverment is here to benifit large companys and the militry which go hand in hand, not small business

[Melboy]

After 2016 i will be exchanging my 300,000 pound rental property with my friend for his 300,000 pound property to rent out so i will assume i will be stung for the additional 3%,  my question is what happens if i decide to live in the new house that i have just exchanged as my only and main resident's for say 6 months  and then decide to rent it out after the 6 months,  i live with my sister so i only have 1 property at a time will i be able to advoid the additinal 3% tax

Probably yes because your solicitor has to complete an HMRC taxation form and send to HMRC. There is virtually no exemption on SDLT now for what you are proposing to do.

Living in a property for 6 months does not exempt you either. It is a myth. If you consult with HMRC they can explain the residential occupation rules to you because they are fairly complex.

[Melboy]

I'm still not clear on this................

 

I have a flat worth £115,000 and sell it on April the 20th to a BTL investor. Would that 2nd home owner pay SDLT and if so how much?

[Richlist]

I am unsure as well....we will probably have to wait until the Gov issue final clarification.

What has been said is that any property bought as a 2nd home ....investment, btl, holiday home etc will have a 3% increase applied to the stamp duty bands. So for your question there are 2 possible outcomes.....

1. As its under £125k which is zero rated for sdlt, then nothing is payable or

2. Sdlt at 3% over the £50K nil band allowance is payable = £1950

If you do find out please let the rest of us know.

I'm actually going to be selling a property for around £120K after April 6th 2016 so have a keen interest in the answer.

[Melboy]

I have searched for a definitive answer but cannot find it. I suspect it will be liable to some form of additional SDLT.  The chances are it would be sold to a 1st time buyer the way house prices are escalating around here.  I may keep it on though as interest rates are so low it is hardly worth having cash on deposit in the bank and a flat like this is a good source of monthly income without too much hassle to keep it on..

[Richlist]

It seems we now have clarification of the new stamp duty rules/ charges.

Details are:

Sale price.               Old sdlt          New total sdlt. 

40k.                            0.                           0

50k.                            0.                           1500

125k.                          0.                           3750

150k.                          500.                      5000

200k.                          1500.                    7500

Note that new 3% is additional to whatever the old sdlt was.

Bad news for 99% of us I'm afraid !!!

[Richlist]

Seems that considerably more investors are buying property within a limited company since the sdlt announcement recently.

This might be the way to go for future purchases......we'll just have to wait for the outcome of the government's consultation program on the subject to see if it will really be a benefit.

It's not likely to help with any property already owned as in order to put the property under a limited company one has to incur sdlt, legal fees and possible cgt. But for any new purchases, it might be the best route.

One downside is that there are less mortgage products available for limited companies and mortgage interest rates tend to be slightly higher.