It’s Tuesday!
Let’s talk Tax.
Read this week’s short Tax snippet for doctors & dentists, to help you save money and get more organised with your tax affairs. It’s just to give you a flavour – take 5 minutes with your coffee to have a read.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice.
New Stamp Duty Land Tax (SDLT) on second homes
The government introduced a 3 percent surcharge of SDLT on second homes, which came into effect in April 2016.
At the start of 2016 there was a surge of transactions from property investors buying-up property to avoid this extra tax charge. And who could blame them, the tax charge can up to tens of thousands of extra pounds in up-front costs.
So, is there a way around this extra tax?
If you are a serious property investor, and investing in properties for buy-to-let purposes, then it is likely that you are going to end up paying the SDLT surcharge.
However, if you have flexible living arrangements and want to make some money out of buying and selling one property at a time, there are a few things you can consider.
The 3% SDLT surcharge is void, if:
- The property is valued at under £40,000
- The property is not 100% residential – i.e. part retail / commercial with a flat above
- It must be purchased in one transaction
- The property is replacing a main residence that has been sold
- The transaction is a bulk acquisition of more than 15 properties
- This option is for corporate buyers
Buy and sell within 3 years + juggle your main residence
If you purchase a second home, yet your current home hasn’t sold yet, you will be required to pay the SDLT up-front on the new acquisition.
However, you have a window of 36 months to be able to sell your first home, and claim a refund of the SDLT paid on the second property.
There is therefore an option, for some low-level investors to own two properties, with a view to selling the initial one within the set timeframe.
It needs to be a careful juggling act with where you call your main residence, and if you choose to let your home in the interim, it is essential to get advice.
After the 3 year window of opportunity, there are no grounds for a refund, so careful management of transactions is essential.
Terms & conditions do apply and a specialist accountant can help ensure you manage your timeframes and paperwork correctly.