Best route to mitigate Stamp Duty for new landlord?

by Readers Question

14:35 PM, 23rd January 2019
About 2 years ago

Best route to mitigate Stamp Duty for new landlord?

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Best route to mitigate Stamp Duty for new landlord?

Background is that we are looking to buy a new residential property and retain our current property as BTL. I work and am hitting 40% tax, my partner has no income.

Reading the forum (excellent BTW) I can see that setting a declaration of trust up would enable us to use her tax free allowance.

However, we are currently looking at 12,800 of stamp duty due to the +3% on purchase of a 285k new home. Reading through the forum I feel there is a route to relieve that +3% through perhaps say a limited company route.

Our intentions are to grow the portfolio as when we can from our rental income, slow to start with but hopefully move to a position where property rental becomes our primary income for retirement.

What I am looking for is some initial observation as to if there is a tax planning route to relieve the +3%, what are the timescales involved in setting these things up, including can it be done in retrospect (i.e. we complete a standard mortgage route then sell the LTB to the limited company and claim back the +3%?)

Will happily head down the formal consultation route if there is a path to achieve a better tax & stamp duty position.

Mr J


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Comments

Mark Alexander

14:52 PM, 23rd January 2019
About 2 years ago

Hello Mr J

If you sell your existing home to your own Limited company then the company will have to pay SDLT. However, that might be a lower amount than the reduction in SDLT you would then pay for your new home. It's impossible to say without the figures.

There shouldn't be any CGT to pay when you sell your home to your company if it has always been your home since you purchased it. However, if you have ever let that property you should also consider CGT implications.

The final piece of the jigsaw to complete will be the mortgage that your Limited Company will need to obtain in order to purchase your current home from you.

If you can sort all of the above so that it makes financial sense then great. However, a further question to ask yourself is whether your current home would be the best possible buy to let property you could buy in your Limited Company. If not, then why not just sell it and buy another property in your Company name instead?

Beaver

9:47 AM, 24th January 2019
About 2 years ago

As Mark says, if you have ever let your home you should consider CGT implications. If you have ever let your home then CGT is payable in proportion to the amount of time you have let it vs. lived in it. If you have lived in your home for 20 years that's an additional consideration.

Eps

11:23 AM, 24th January 2019
About 2 years ago

We were faced with a similar scenario a couple of years back and we looked at every route possible to try to reduce overall costs. There weren't any! If we gained in one way, we lost in another so for us the figures simply did not work out with the costs of setting up a ltd co.

ahloughlin@gmail.com

6:37 AM, 25th January 2019
About 2 years ago

I would not go down the BTL route at all now with all the onerous changes. I am selling mine one by one and making more by putting money into a range of top shares, eg. Persimmon, TW etc. They yield well over that of a BTL and with no hassle from tenants etc, no complex rules to navigate, and a much more generous simple tax regime. EG. Use capital gains allowance and dividend allowance and then just a low rate on rest.


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