Property TV | Property Question Time – Ep 114 – Stamp Duty Land Tax (3% SDLT)
Jo Grimwood: So I’m actually going to start with a question for you, Paul. “I am looking at my options to moving house to be in the catchment area of a secondary school. I own my home, mortgage-free and another buy-to-let property with a large mortgage on it. I’m considering selling the buy-to-let property and taking out a new buy-to-let mortgage on my present home to pay for the new home. As much 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.”
Paul Mahoney: Okay. The way that the 3% stamp duty premium rules are written, is it doesn’t matter whether it’s a buy-to-let or a home. It’s any second or subsequent purchase. So even if they were to sell the buy-to-let and turn their current home into a buy-to-let, in buying that second property, acquiring that second property, they would be liable for the extra 3%. So their understanding is a little bit wrong there because they would pay the 3% on the subsequent purchase.
There’s various things they could look at doing there. Assuming they really want to keep their current home and that current home makes sense as a buy-to-let, as a property investment as opposed to the place that they bought to live in, they could move that into a limited company. They would pay 3% on that movement or change of ownership but not on the subsequent purchase. That would only really make sense if the subsequent purchase was at a higher value because then they’d be saving themselves on that one as opposed to the one that they own.
They could take a buy-to-let mortgage on their existing home to allow them to buy the new property. Given they own that debt-free currently, they could do that before or after moving it into a company, if that’s what they were going to do, to release the funds. In doing so, they would be an accidental landlord in the eyes of lenders, so that does limit them a little bit or it makes the mortgage what’s considered a consumer buy-to-let, and so there’s more boxes to tick, less products available. So that’s something worth considering as well.
I suppose as with a lot of the questions that we get on this show, we’re presented with limited information, so what’s important is for them to have a very clear picture of what all the information is and speak with a professional who can advise them on what all of their options are and what works best for what they’re trying to achieve.
Jo Grimwood: So do your research. Very important.