Jump to content

SDLT after selling main residence 3 years ago


Recommended Posts

Hi Everyone,

This is my first post after listening to the podcast for a few years, and unsurprisingly it relates to SDLT.

Myself and my wife use to own a London flat (main residence) before we were married, which we sold back in 2016. Since then we've been in rented accommodation. We're now looking into starting our property adventure but would like some advice on the following.

Given we sold a primary residence and have not completed the purchase of a replacement main residence before the 26th November 2018, it looks to us we will need to pay the additional 3% SDLT if we buy any property in our names. To us the most tax efficient way forward looks to be to start buying BTL properties into our LTD company, paying the 3% surcharge each time. However when it then comes to buying a main residence in London, which will create a much high SDLT payment, we transfer one of those BTL properties into our individual names, pay the 3% surcharge again and designate it as our primary residence and then sell it back to the company when we purchase our main residence, avoiding the additional 3% surcharge on the new main residence.

There should be a break-even point where the additional 3% surcharges incurred moving the BTL property out of and then back into the LTD company are greater than the 3% surcharge on the new main residence. For example on an £800k London flat the 3% surcharge equates to an additional £24k SDLT, so as long as the cost of moving the BTL property around is less than that then it should still be the right economic decision. This would put the break-even value of the BTL flat at £275k, as it incurs £12k SDLT moving the property out of the company and another £12k moving it back in.

Any thoughts on whether this is possible, pragmatic and the most tax efficient way of ending up with a new main residence in London and a BTL portfolio in a LTD company would be greatly appreciated. I've also ignored the impact of any CGT tax liability generated in the above scenario and any thoughts on this would be helpful.

Sorry for the long post, but wanted to come up with a suggestion to be critiqued rather than just a request for information.

Thanks,

James

Link to post

Good Afternoon James

If you disposed of your main residence and do not currently own any other property or a share in another property, then you will not be liable to the 3% surcharge on your next property purchase. The 3 year rule you are talking about relates to buying your next residence, prior to selling your old one. You have 3 years to reclaim the 3% surcharge on your new residence, if you purchase it before selling your old one.

As your main residence will probably be more expensive than your BTL, it would make sense to buy your main residence first to use your lower SDLT rates and then purchase your BTL. Alternatively, you are able to purchase your BTL through a limited company first and you will still retain your lower rate of sdlt on the purchase of your main residence if you wish to do it that way round.

Jagrup Lewis
Accountant & Client Manager

https://propertyhub.net/service/tax/

03_tax.png.a17b7d630c261775113e6f323730c943.png

 

 

 

 

We can only give general information on a public forum, and nothing in this post should be interpreted as advice. To speak to us about becoming a client and receiving bespoke advice, call us on 020 3936 2170 or email tax@propertyhub.net

Link to post

Thank you Jagrup, that is very helpful, especially given the situation is better than I had feared after skimming through the HMRC manual. Obviously I should have spent more time going through the body of text, Apologies, I feel like I've wasted your time.

With regards to your last sentence...

"Alternatively, you are able to purchase your BTL through a limited company first and you will still retain your lower rate of sdlt on the purchase of your main residence if you wish to do it that way round."

This is because HMRC won't look through to the directors and treat any homes in a ltd company as a separate entity from you, even though you are a joint shareholder? This could be preferable for us as we currently have a rent deal that is below market rate, so can look to arbitrage between what rent we pay and what we can collect from a portfolio, while continuing to grow our capital for a primary residence.

Thanks again for your help, hugely appreciated.

Link to post

Hi James

Yes that is correct, a limited company is a separate legal entity. 

Jagrup Lewis
Accountant & Client Manager

https://propertyhub.net/service/tax/

03_tax.png.a17b7d630c261775113e6f323730c943.png

 

 

 

 

We can only give general information on a public forum, and nothing in this post should be interpreted as advice. To speak to us about becoming a client and receiving bespoke advice, call us on 020 3936 2170 or email tax@propertyhub.net

Link to post

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...