Stamp Duty On my Son’s First Purchase of Buy To Let?

Hi Simon,

Good question about the 300k exemption if the purchase is in your son's sole name and he is not living at the property and renting it out. I don't 100% know as we have not run across this scenario before. However, yes if you are only going to end up owning one property there is no additional 3% surcharge.

If he is going to be living at the property then it is his main residence and potentially with Lodgers, so I don't see why he wouldn't get the 300k allowance.

However, if the property is going to be mortgaged and you are required to be on the title deeds then the 3% surcharge will apply as you will end up with more than one property.

Could you possibly explain exactly how the property is being purchased and the end outcome as this may make it clearer?

Hi Neil,

Firstly many thanks for publishing my question. I am thinking of buying my son a very first property on his own name on Buy To Let basis as he does not have any income and we have now sourced a lender who will base lending on anticipated rental income as opposed to personal earned income.

As he is unable to buy without any income Buy To Let route was the only feasible one. However in future let's say in 10 years time once he has income he might convert it into Residential property and move in himself. So my question is, I am aware NO 3% surcharge is applicable on this purchase but I am unclear if first £300k exemption will apply in this case?

Hi Simon,
I've done the same thing for my two sons. The elder one was 20 when I purchased the property which was straight forward. The younger was 17 when it went through, so a little more complicated.

In your scenario, what's more important is how it's being funded. If cash, then you need to decide how you're giving him the money and what protection you might want for him and ultimately you and your gift. For this, it could be an outright gift or loan, or a mixture of both. You should also consider using a Trust to help provide some protection for him and you.

As Neil said, the key with the SDLT is how many properties he will own after the purchase. If one, then no surcharge. As far as the exemption is concerned, again I don't see what he does with the property after purchase has any bearing on whether he qualifies or not. There should be no problem in this regard.

If you're borrowing money for the purchase, then you will be linked and you will have to pay all the surcharges.

Thanks Paul. He has no choice but to buy a property on Buy To let basis in the absence of earned income. I get it there is no 3% surcharge but would he be subject to first £300k exemption as this is his first purchase albeit being on buy to let basis? (it would be mortgaged as stated above)

Hi Simon,
I've not found any differentiation in the paperwork on what the property is being purchased for, just whether it's his first and only property.

You'll do well to get a mortgage in his name without you appearing somewhere. That will be your challenge as I see it.

Hi Paul, do you show on paperwork on your sons purchases? Did you have to pay higher stamp duties? (i.e buy to let/second property rates)

Each had to be treated differently:

For my eldest who was over 18, I created a trust for him to purchased the property. He was then given a "Life Interest" in it meaning he can live there or receive all the income from it if rented. By using a trust, it protects him for any unfortunate life choices or relationships putting a claim on the property later in life.

For my second son who was 17 at the time, we repeated the above Trust setup but being a minor who can't legally own property in the UK, I had to pay the +3% SDLT. Any income to a minor is charged against the parent, so for the interim few months it was charged against myself. Thereafter, the income became his and then carries on as normal.

There are Tax implications using Trusts, but if carefully managed shouldn't result in a bill.

Reply to the comment left by Simon Hall at 11/01/2018 - 11:06
Hi I’m trying to help my son in a similar position can you pass on the mortgage lenders you found to be the most helpful

Yes, I would also like to know who the mortgage lenders are. I am also interested in whether I can sell/gift houses to my children -both now 18 or over - and obtain mortgages on them at the point when they have sufficient independent income. I am wondering what steps need to be taken to prepare this over the coming years. I did read somewhere that lenders won't lend when the house has been sold to them by a relative... I am also thinking that they may need to take out a credit card and prove that they pay it off each month to improve their credit worthiness. Does anyone have any ideas on how you improve their credit record?

Reply to the comment left by Paul Mullally at 11/01/2018 - 13:09
Hi Paul

What were the overall costs of setting up the trust please?