Stamp Duty surcharge

[LostInTaxation]

Hello

I'm finding it quite hard to ascertain how the new SDLT rules apply in our scenario, so I would appreciate advice!

We are purchasing a new house that will be our main residence. We are a co-habiting couple, not yet married or in a civil partnership.

We live in my OH's property. I contribute a small payment each month to the bills and mortgage. I also own a flat that I have let out but used to live in. This property has had tenants (the tenancy started roughly two years ago and ended under a year ago) and has been vacant (meaning I have paid council tax, etc).

Will I need to sell the flat in order to avoid the surcharge?

Another issue is that, in order to complete on the purchase, we were thinking of turning my OH's property into a BTL and then sell it a little bit later. The mortgage company would be fine with this, but (a) would we be subject to the surcharge a given our main residence would be the new purchase, (b) if we did need to pay the surcharge, could we claim it back on selling my OH's property, and (c) do I need to have sold my own BTL flat in order for any of this to be possible?!

Many thanks in advance!

[someone]

It's rather complicated in your case.

If you lived in your flat within the last three years then you can buy the new property and then both sell your existing properties to get a refund of the 3% SDLT.

If you haven't lived in it within the last three years then you need to sell before buying the new property. You will not get a refund if you sell afterwards.

Your OH can sell their property before or after the purchase of the new property. But it would have to be sold within three years to get a refund of the additional SDLT.

One possibility, if you can postpone moving for a time, is to get yourself put onto the mortgage and deeds of your current residence (if you take a small share - less than 40K share of mortgage but more than 40K share of property - then there will be no SDLT to pay at this point).

Later, you move and sell your existing home. Now you will both be replacing your main residence and you will not need to have sold your BTL to avoid the additional 3% SDLT.

Alternatively, you marry. Again, selling of your current residence will then avoid the additional 3%. You need to be married before your OH sells your current residence.

[LostInTaxation]

Thanks.

How would I evidence having lived at the BTL flat? I am on the electoral roll and pay council tax there. Is that sufficient? Would having a BTL mortgage or filing a BTL tax return create any issues?

Also, would there be any capital gains tax implications from selling it?

We do intend to get married as it happens. How would this help?

[someone]

Thanks.

How would I evidence having lived at the BTL flat? I am on the electoral roll and pay council tax there. Is that sufficient? Would having a BTL mortgage or filing a BTL tax return create any issues?

You just say you were. But if HMRC decides to challenge it then they'll ask for evidence. Being on the electoral roll and paying council tax is a good start. Gas/electric usage, telephone etc are other things they might look at. But it obviously isn't a main residence while you've been letting it.

Also, would there be any capital gains tax implications from selling it?

Possibly. But if it was your main home up until less than three years ago then they're likely to be small.

We do intend to get married as it happens. How would this help?

[/quote]

If you're married then the replacement of main residence applies if you OR your spouse disposes of a main residence. Therefore your OH selling your current home would count as a disposal for you too and so you'd also be replacing your main residence meaning you could keep your BTL. If you're not married then you each independently need to dispose of a main residence therefore either you both need to own the house you're selling or you both need to be selling a main residence.

[LostInTaxation]

Thanks. On the marriage point, does it matter whether or not I own any share of my wife's property? Or is it simply based on us being married and my link is through that alone?

[someone]

Thanks. On the marriage point, does it matter whether or not I own any share of my wife's property? Or is it simply based on us being married and my link is through that alone?

You do not need to own a share. Your spouses property is your main home too and when she sells it it counts as a disposal for you too. But only if you are married.