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Where Taxpayers and Advisers Meet

Flat worth barely 40k

Stungbad45
Posts:1
Joined:Fri Aug 25, 2017 9:59 pm
Flat worth barely 40k

Postby Stungbad45 » Fri Aug 25, 2017 10:19 pm

I bought a leasehold flat in 2008 for 75k. Since the I have struggled to sell as;

It is a studio - lenders are reluctant and freeholder will not do repairs so has run the property down. The flat has been valued at less than than what I owed on mortgage.

So I kept hold of it - just to pay off enough of mortgage in order to sell I now owe 51k. I don't live in flat and it's currently empty - so I'm paying rent in other accommodation ( thus paying someones else's mortgage) as it's located 200 miles from where I work. I have been told by agents that although the value may be above 40k that it's unlikely that I can sell it. The flat has not been my main residence in more than 3 years -

So me and my partner have been working hard ( me loads of overtime- no holidays) and have started again whilst chipping off at the mortgage on flat. We have managed to save enough deposit to buy a house and get a mortgage (my flat does not count as it's in negative equity - thus no equity to release) I'm 35..

However if we buy when I still own a flat ( which I am unable to sell and has 0 equity) we will have to pay extra 3% stamp duty- which is money we don't have.

I understand the rules for people who have equity and are making money out of property - Aldo trying to make more accommodation available for people rather than it all being bought as buy to let's -

But for me I have a flat I want to sell - no one will buy it - it's barely worth over 40k ( I only kept it to be in a position that I could sell and not owe on mortgage- bought at 74 I owe 51 now - ) and because of this I'm going to get taxed and extra 8k on new house? When I have lost out so much and am stuck with this weight around my next which has cost and cost for 10 years - mortgage interest , fees maintenance + factor in depreciation - now an additional tax cause I can't sell- I found out about the 3% surcharge on Sunday and honestly I wanted to jump off a bridge!

If it's valued at < 40k (for the flat I own) do we still pay 3% surcharge on second property? Also are there any exceptions around rules? If it's valued at 41k?!?!

If I didn't owe 51k on the mortgage I would give it away!

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Flat worth barely 40k

Postby maths » Sat Aug 26, 2017 2:58 pm

If the flat is worth less than £40,000 at the date of "completion" of you new purchase then the 3% SDLT charge will not apply.

If it is worth £40,000 or more the 3% SDLT charge will apply whether it is sold before or after your new purchase because you indicate that the flat has not been your residence for at least the last 3 years.

The market value of a flat is difficult to determine with any accuracy. Are there other similar flats in the area which have sold; have you checked this using the various house selling websites. Your best bet is to to get someone (surveyor/agent) to indicate that £40,000 is above its market value.

SDLT Geek
Posts:232
Joined:Sun Apr 30, 2017 5:45 pm

Re: Flat worth barely 40k

Postby SDLT Geek » Sat Aug 26, 2017 5:19 pm

You do not say whether you own the flat alone, or if it is owned with your partner. If it is owned 50 / 50 with your partner then, according to the HMRC Guidance, you should look at the value of the share that each of you has. From what you say, that will be well under £40,000 and your problem goes away.

Whether one takes the value of the whole property or the value of the share held is not entirely clear under the legislation as the definition of "major interest" is unclear. I take the view that it must mean the beneficial share, but it would be difficult to know what a Tribunal or court would make of it.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Flat worth barely 40k

Postby bd6759 » Sun Aug 27, 2017 3:27 pm

If it is worth £40,000 or more the 3% SDLT charge will apply whether it is sold before or after your new purchase because you indicate that the flat has not been your residence for at least the last 3 years.
The 3% won't apply if it is sold before his new purchase.


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