Jemma Forte: This person has written in saying, I’m looking at my options for moving house to be in the catchment area of a specific secondary school. I own my home. I’m mortgage free and then I have another buy to let property with a large mortgage on it. I’m considering selling the buy to let and taking out a new buy to let mortgage on my present home to pay for the new home.
As must as I’m aware, if I was to sell my home and buy a new one or even rent a home for a year or two, and then buy a new home, I wouldn’t be liable for the additional 3% SDLT but I can’t work out if I’d be liable for it if I were to sell my existing buy to let, but keep ownership of my home and turn it into a buy to let. Any advice?
My mind feels quite fried. I’m trying just to keep up with all of that.
Paul Mahoney: I think I’ve got that.
Jemma Forte: Yeah?
Paul Mahoney: It’s not specifically my area of expertise, but I do understand the rules around it and we can and do advise in a way. My understanding is that what they’re asking to do, sell the home, keep the buy to let, buy a new home, is they would be liable for it on the new home.
Because it’s not specifically buy to let properties. It’s second and so forth property purchases.
Jemma Forte: Got you.
Paul Mahoney: So even if you don’t own a property and you buy a buy to let, you’re not liable for it on that first purchase, but you are liable for it on any subsequent purchases. So unless they sell both, they would be liable for it on that subsequent purchase.
Jemma Forte: Right, okay, yeah. So basically, in any case, where you’ve got more than one gaffe, you’re going to pay, yeah.
Paul Mahoney: It’s an easy mistake to make because it is referred to as affecting buy to lets, but, in fact, it affects any purchases more than one property.
Jemma Forte: And it’s interesting isn’t it, their sort of moving house and the catchment area situation. That’s something that’s huge specifically in the UK. Or I know it is in London. And it actually changes the house prices doesn’t it?
Paul Mahoney: Yep. And there’s actually a little trick around … It doesn’t apply to them perhaps. If somebody’s upgrading … So let’s say they currently live in a £100,000 property and they’re planning to buy a £500,000 property, but they want to keep the £100,000 one, in that scenario, they would be liable for the extra 3% on the £500,000 property, which is a lot more than 3% on a hundred grand. So one way around that would be to sell the initial home to a limited company, which is a separate entity.
Now you would pay the 3% on the hundred grand because there’s no first concession for a limited company, but you wouldn’t pay it on the 500 grand property.
Jemma Forte: Oh, okay.
Paul Mahoney: So they’d save themselves quite a lot of money there. They’d put the buy to let into a limited company structure, which to some people would be a good way of structuring it anyway and they’d avoid paying tax on the higher value property.
Jemma Forte: Oh there you go. The right little tricks.
Paul Mahoney: Maybe that would work for them if they were willing to move, sell their home, move their buy to let into a limited company and then buy the new home. Something worth looking-
Jemma Forte: Yeah, that’s definitely probably worth examining in full, thank you, that’s great.