Temporarily Switch Residential Home to BTL

by Readers Question

9:09 AM, 2nd March 2018
About 10 months ago

Temporarily Switch Residential Home to BTL

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Temporarily Switch Residential Home to BTL

We’re buying a new home to live in ourselves & have therefore been trying to sell our current main home. This is taking longer than we wanted and we’re on a timeline as the builders for the new home set the exchange and completion dates according to their build schedule.

My IFA suggested that rather than sell our existing home we instead consider temporarily renting it out (i.e. remortgaging it with a BTL mortgage to free up some of the equity in it) and buying our new home with a combination of a new residential mortgage, the partially released equity from remortgage of the old property and savings.

We already have a small portfolio of 5 BTL properties that we’ve had for 5+ years so the lettings market is familiar to us so no problems there.

My questions (my conveyancer hasn’t been very helpful unfortunately):

1. We’d effectively be buying the new build home without selling our existing home (at least temporarily) so we’d presumably fall foul of the extra 3% stamp duty tax? If we sell our old home within a certain amount of time could we entirely claim this back; does the fact that we’d be temporarily renting it out in the interim cause any problems with getting the stamp duty back?

2. After converting our current home to a BTL we’d possibly move into one of our existing BTL properties for a couple of months to make it easier to find a tenant for our current home; does this muddy the water as far as tax implications / stamp duty is concerned?

3. Any other issues that I haven’t considered?

I’d like to maybe discuss the various financial options and tax implications with someone but what sort of professional person do I need to talk to…the various questions I have don’t seem to entirely fit within the remit of an IFA, conveyancer or accountant but seem to be more of a crossover?

Thanks for any replies / information.

Jason



Comments

Neil Patterson

9:19 AM, 2nd March 2018
About 10 months ago

Hi Jason,

If you are replacing an existing main residence with a new main residence you have up to 3 years to sell the old property to get a full refund of the SDLT surcharge.

If you move into another property for 2 months the question is are you then replacing the last main residence for the new one.

I think the answer is yes you will still get a refund and the interim property won't affect anything, but to belt and braces I would ask HMRC first.

CGT on the old property with PPR relief should not be an issue, but depending on how long you leave it you can check on the .Gov PPR calculator at a later date >> https://www.gov.uk/tax-relief-selling-home

"1. Private Residence Relief

You don’t pay Capital Gains Tax when you sell (or ‘dispose of’) your home if all of the following apply:

you have one home and you’ve lived in it as your main home for all the time you’ve owned it
you haven’t let part of it out - this doesn’t include having a single lodger
you haven’t used part of it for business only
the grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total
you didn’t buy it just to make a gain

You don’t need to do anything. You’ll automatically get a tax relief called Private Residence Relief.

If you don’t meet all these criteria you may have to pay some Capital Gains Tax."

Jason Robinson

17:35 PM, 2nd March 2018
About 9 months ago

Reply to the comment left by Neil Patterson at 02/03/2018 - 09:19
Hi Neil...thanks for the information.

For more detailed questions along the same lines with the specifics of my situation am I best talking to a conveyancer or someone more specialised (I don't mind paying for someone's time of course).

Puzzler

9:03 AM, 3rd March 2018
About 9 months ago

If you move into one of the other B2L properties, you're potentially in contravention of the mortgage on that property whose terms almost certainly say that you or a family member cannot live there...

Jason Robinson

12:50 PM, 3rd March 2018
About 9 months ago

Reply to the comment left by Puzzler at 03/03/2018 - 09:03
Yes, we realised that might be an issue...if we do move into one of our existing BTL properties we'll have to consider our options based on how long we might be there. A good point, thank you 🙂

BigTrev

12:44 PM, 4th March 2018
About 9 months ago

You have a portfolio of 5 properties, you will definitely be paying the extra 3% stamp.

Jason Robinson

16:05 PM, 4th March 2018
About 9 months ago

Reply to the comment left by BigTrev at 04/03/2018 - 12:44
Hi Trevor...thanks, but yes we'd realised that we'd fall foul of the extra 3%...the question was really about the likelihood and mechanics of claiming it back.

Also would still like to know of which class of expert professional would like some of my money for advising on my particular circumstances...Anyone help?

Thanks
Jason

BigTrev

20:56 PM, 4th March 2018
About 9 months ago

Reply to the comment left by Jason Robinson at 04/03/2018 - 16:05
You cant claim it back. You can only claim it back if you don't own any other properties, regardless if you are buying a main residence and selling a main residence.

Jason Robinson

11:21 AM, 5th March 2018
About 9 months ago

Reply to the comment left by BigTrev at 04/03/2018 - 20:56
Hi Trev
Please someone else correct me if I'm wrong but I'm pretty sure you can claim it back if you're selling your main residence and buying a new main residence.

https://www.gov.uk/government/consultations/consultation-on-higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties/higher-rates-of-stamp-duty-land-tax-sdlt-on-purchases-of-additional-residential-properties

Quote:
Example 10:
O is a buy-to-let investor with 10 residential properties in his portfolio. He also owns one residential property which he uses as his main residence. He decides to sell his previous main residence and purchase a new main residence.

At the end of the day of the transaction, he owns 11 properties – his new main residence and his 10 buy-to-let properties. However, as he has replaced his main residence he will not pay the higher rates of SDLT.


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