Avoiding the additional stamp duty by transfer of deeds?

Avoiding the additional stamp duty by transfer of deeds?

10:01 AM, 6th January 2022, About 3 weeks ago 15

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I bought a 2-bed flat in 2016 in Scotland as my main residence for £167k and have £77k left on the mortgage, the flat I believe now to be worth only ~£90k.

I moved back to England and bought a second home in 2019 (main residence) for £267k with £200k left on the mortgage, the house I believe now to be worth ~£300k.

I didn’t want to sell my flat because of the huge loss I would make, so I rent it out to a friend (albeit still on a residential mortgage) including bills but for less than the monthly mortgage payments + bills etc.

I paid additional surplus stamp duty on my second home in England (~£12,000) but understand if I sell my flat within 3 years I can get the additional part (~£8k) back but when my flat is worth so much less now than in 2016, I don’t want to sell it and accept the loss especially when it is being rented out.

I am a higher taxpayer (40%) and my girlfriend is a lower taxpayer (she doesn’t own any property) and my mother is a lower taxpayer (shared 50% ownership with my dad and mortgage free). My mother inherited a house off her mother in 2020 mortgage free and rents it out as an HMO. I have a sister who is also a lower taxpayer and homeowner. I don’t have any children.

I am the only one down on both mortgages but interested in purchasing a new property with my girlfriend (£400k-ish in England) but don’t want to pay the £22k stamp duty bill and don’t really want to sell my first flat at a significant loss. My second main home in England I am happy to sell as it’s increased in value but don’t really need to, to afford the third shared place with my girlfriend, so I am open to keeping and rent it out or selling.

My girlfriend doesn’t have as much savings or a high paid job so wouldn’t be able to afford £400k new home and soon as my name is involved we would be stung with a £22k stamp duty bill as it stands. I don’t particularly want to give my girlfriend £50kish, and it all be under her name as owner as it would leave me vulnerable and friends of friends have found themselves in a position which they significantly regretted doing similar.

I appreciate it may sound like I am trying to have my cake and eat it, while also insuring myself against risk, but we have to start somewhere –

Is there any options I can take such as transfer deed of flat to Mum as beneficiary and her pay the £1,500 (3% of the £50k which is above the threshold of £40k if valued at £90k) but I still pay the mortgage and sell my second home the usual way to avoid the additional stamp on my third shared place with girlfriend and I get the £8k additional stamp back (minus £1,500 I would give back to Mum)?

Or move both current properties over to a LTD/LLP?

Many thanks

Mike



Comments

by Katy Ann

9:09 AM, 8th January 2022, About 3 weeks ago

Reply to the comment left by michael O'Connor at 07/01/2022 - 14:56
It doesn't say “major stake”; it says “major interest”, which is a different thing. “Major interest” means either a freehold or leasehold interest, as distinct from (say) a lesser kind of right over the property such as a licence to use the property short term.

by Crossed_Swords

11:49 AM, 8th January 2022, About 3 weeks ago

Which property is nominated as your PPR main residence? You can only have one. Ignoring the issues about letting on a residential mortgage, if you are within the 2-year period when you can elect, choose the English property (sounds like you already have). Then when you sell the Scottish property you can declare a loss for CGT which can be carried forward and set off against future CGT gain. Your rent on the Scottish property is taxable and mortgage interest is not deductible.

by Crossed_Swords

11:55 AM, 8th January 2022, About 3 weeks ago

Correction: mortgage interest is relieved at the basic rate

by michael O'Connor

12:11 PM, 8th January 2022, About 3 weeks ago

Reply to the comment left by Crossed_Swords at 08/01/2022 - 11:49
I am English and larger house is my
Main.
That sounds like a plan. Not sure when I sell my Scottish flat, say if it’s 2030 at £50k loss and I don’t sell my main residence at that time until 2040 at £30k gain, I’d only pay CGT on £20k despite it being different tax years

by michael O'Connor

13:21 PM, 8th January 2022, About 3 weeks ago

Reply to the comment left by michael O'Connor at 08/01/2022 - 12:11
* pay zero as I’m minus £20k.
Was thinking it would have to be in same tax year but il read into that further. Thanks


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