I took a call from someone that had been sent to be by a solicitor recently. They had been told the amount of stamp duty land tax (SDLT) thy were going to pay and were quite surprised.
They were buying a house but wanted to retain their old one as a BTL. Their solicitor told them it was £9,000 higher than they thought it would be.
A couple of years ago they bought a £60k flat to live in and because it’s so cheap they are going to keep it and rent it out. Now they are buying a home to live in they don’t understand why the additional 3% SDLT is being levied.
This comes from a common misunderstanding that you don’t pay it on the house you live in as your home. That’s not what the rules say though. They ask if you own more houses at the end of the day of purchase than you did at the start and if you do then you pay the additional rate. You can only dodge it when buying a home if you are also selling a home.
What do do then? Well they can sell the flat. That’s simple. What if they really want to keep it though? It’s possibly cheaper to sell it to a limited company than it is to pay the additional SDLT on the new purchase. Is that a good idea though?
If you know me at all you’ll know a pet hate is unnecessary limited companies. The annual running costs plus initial charges of getting it in there will mean that they will burn through that £9,000 they are trying to save quite quickly. So what then? Well, it’s boring but run the numbers based on your plans. If they want to build up a 50 unit BTL company then start now with this one. If they never want any more BTLs the company probably isn’t worth it.
What they do have though is a basis for making an informed decision which is well worth an hour of time and few hundred quid on fees.