stamp duty question on rental property vs own property

  • Filter
  • Time
  • Show
Clear All
new posts

    stamp duty question on rental property vs own property

    Dear Forum members

    I've joined the forum with a specific (initial!) question in mind. it's the ever thorny issue of the dreaded stamp duty (SDLT) and how it applies to rental property.

    My situation is this:

    My son owns no property currently (he rents where he lives), and has no plan, right now, to buy (can't afford where he wants to live!)

    If he buys a property he can afford, and rents it out, I appreciate he will have to pay SDLT on the purchase price (he won't get the First Time Buyer exemption as he does not plan to live in the property himself)

    BUT, if he were subsequently to buy a property for himself, for him to live in, will he then have to pay Second home SDLT (ruinous rate!) on that property, simply on the grounds that he already owns a property (albeit a rental one) (unless, of course, he were to sell the first, rental property, and so only pay the standard 'next property' SDLT)

    Will it make any difference if the initial property he buys has a 12 month holiday rental restriction on it, so it cannot be used for long-term residential leases, but only FHL furnished holiday lets? (I ask because after all, he could never use this FHL property as his 'own home' as it has a non-residential restriction on it).

    I have a bad, bad feeling that HMRC will hammer him for 2nd home SDLT if he buys his own home after buying ar rental property, even if his first property is either BTL or FHL.

    I know a friend of mine who bought a BTL property AFTER she already owned her own home (before the days of the extra hike in 2nd home SDLT), and then when she sold her own home and bought another, she did NOT have to pay 2nd home SDLT, even though she still owned the rental property, as she was replacing her own residential home so the fact she still owned a rental property was 'discounted'.

    Thank you for any replies, even if they only confirm my fears.


    I have a rented property, when I purchased a second property as my residential I had to pay the additional 3% stamp duty.

    Rules may have changed since I got my BTL (it was several years ago) but it was very difficult to get a BTL mortgage without having a residential mortgage and no previous LL experience.

    I am new here too


      If you already hold one property under your name or jointly with others, then for buying next property, you should expect to pay the extra 3% sdlt.

      Best to buy your home first because the sdlt on house up to £300,000 is exempt for first time buyers.


        Ye of course he has to pay. The whole point of the SDLT is to penalise people who want to stand on their own two feet instead of sponging off the taxpayer, penalise mobility, and penalise vulnerability.


          From a pure SDLT viewpoint, buying a property to let before buying your own home gives you the maximum amount of tax to pay.

          That's because you lose the First Time buyer subsidy but still pay the second property 3% surcharge.

          Two points:
          If the first purchase was through a company, the situation would not arise and he would be a first time buyer when he bought his residence - assuming the current rules continue to apply.
          Getting any kind of lending on a furnished holiday let business right now would be next to impossible as Conid19 has, essentially, ended that business for the time being (and maybe forever).
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


            Thank you for your replies! As I feared, I think, as JPK says, my proposal is the worst way to stage the purchases re SDLT!

            It just seems to me 'unfair' (OK, daft word to use in respect of the taxman!!!!) (as in,viz AD's comment!), that someone who already owns their own residence, can avoid the extra SDLT if they replace it, whereas someone who has never owned their own home can't! (ie, if they already own a BTL)

            I just wish my son would get on with buying a home for himself (and, yes, take advantage of the first time buyer SDLT exemption!) but alas, like so many of his generation, where he works means he simply can't afford to, which is why I am keen to get him on the property ladder (renting is fine ...until you lose your job, become old, sick, etc etc....) even if it means him buying where he can't live himself. I doubt I'm alone in this as a parent.

            He's v. fortunate in that, if he were to buy a 'modest' (very modest!) BTL, then he wouldn't have to worry about getting a mortgage, as Bank of Mum and Dad can provide (well, he'll get it when we peg out anyway!) (hopefully not yet...)


              JPK - thank you for the idea about buying through a company, and that therefore the company would be the legal owner of the BTL, not my son, who would then not have 'sullied' his First Time Buyer Status for when (I hope!) he can eventually buy his own home, plus it would also protect him from the 2nd property extra SDLT.

              It is definitely something worth looking into. However, as with many 'amateur' house-owners, the idea of setting up a company is scary, and would definitely require adequate research about liabilities ands risks etc.

              But maybe, like many 'grown up things' (eg, buying a house!) it's not scary once you get a handle on it.

              Thank you for the recommendation!


                Leading on from all of this, if he doesn't go down the 'company' route, I've also been wondering whether owning a commercial property has any adverse implications for SDLT when he does (eventually!) buy his own home.

                Not actually 'commercial' as in a shop/factory/whatever (!), but - and oh, oh, oh, it's a big big but! - if an FHL can ever qualify as commercial.

                I appreciate this probably isn't the forum for this question, as this is for residential landlords, and I shall have to track it down on FHL-oriented sites.

                Reading up a bit more on this online y/day, it does seem there is 'a' chance that an FHL, which has a 12 month holiday restriction on it, so it can never be lived in permanently, and which meets the FHL criteria for qualifying for business rate relief, by being available and rented out to holidaymakers for the required amount of time during the year, and which is rented via a holiday agency or the likes of Airbnb, etc, MIGHT just be 'non-residential'.

                From what I could see, it's a question of 'if it's not residential, then it's non-residential', 'non-residential' is anything that isn't residential. It is residential that has the 'initial definition' for HMRC, and 'anything non-residential' is therefore 'commercial'.

                Of course, IF IF IF that holds true (and I will not be assuming it for an instance!), then there is the added benefit that commercial SDLT kicks in at a higher threshold (£150k\).

                BUT, will the taxman see it that way????? He won't want to, I'm sure. One would need a tough advocate to defeat him, and, as we know, conveyancers do not always get it right about SDLT at the best of times (it's not their money, why should they care, and for them better to feed the taxman more than he actually is entitled to....)


                  Finally - thank you all for your replies so far, and for any more that may be forthcoming!

                  (Great to pick the brains of those who have trodden the path down for others....thankyou)


                  Latest Activity


                  • Reply to CGT after selling my main residence
                    by AndrewDod
                    It doesn't have to be let out.

                    If OP lives in house for 5 years, then finds another primary residence (declared as such, or based on the facts) and then sells original house 2 years later, CGT would be payable on 2/7ths of the gain.

                    If the OP had owned and lived in the house...
                    02-07-2020, 17:03 PM
                  • CGT after selling my main residence
                    by Echoes
                    Hi there
                    First of all thanks in advance for your reply. I would really appreciate if you can calify some of my confusion.

                    I have few queries regarding selling my main residence which would impact on how much CGT I would pay...

                    1. I am buying a new house to live so...
                    02-07-2020, 14:14 PM
                  • Reply to Stamp Duty on Freehold House subject to long leases; merge title?
                    by Gordon999
                    Flats must remain under leasehold title or the next buyer will have difficulty finding a mortgage.

                    sdlt is payable on residential property transfers for £190k property , it is 2% on the amount above £125K. i.e 2% of £65K.= £1300.

                    If you already have a property registered...
                    02-07-2020, 15:25 PM
                  • Stamp Duty on Freehold House subject to long leases; merge title?
                    by carolem
                    Am interested in buying freehold house which is divided into 2 flats, both let out on AST. G
                    round floor flat is held under the terms of a Lease dated the 11 November 1987 granted for the term of 999 years from the 1st February 1987 and the first floor flat is held under the terms of a Lease dated the
                    Should Nelson Mandela's statute remain?
                    Should death penalty's reintroduction be subject to public referendum?
                    02-07-2020, 10:02 AM
                  • Changes to Landlords tax relief and landlords tax credit
                    by cadence248
                    Good afternoon all,

                    I've been getting to grips with the changes to landlord's tax relief over the last few years. One thing that worries me considerably is that since all rental income is now taxed, and I must pay my loan interest and repayments out of this also, that really doesn't leave...
                    02-07-2020, 15:11 PM
                  • Reply to CGT after selling my main residence
                    by jpkeates
                    If you have lived in your main residence since you bought it, there's no CGT on the sale.

                    If you let it out, CGT would be applicable on the period it was let less 9 months (so if you let it for less than 9 months before selling it, there would be no CGT to pay.

                    You will need...
                    02-07-2020, 14:59 PM
                  • Returning from oversea landlord taxation
                    by LAN45

                    I have been living abroad and paied rental income taxes, according to legislation, to HMRC as oversea landlord.

                    ue to recent developments I'm moving back to UK looking for a job and would like to understand how to handle paying taxes? I will have no further income for...
                    22-06-2020, 12:15 PM
                  • Reply to Returning from oversea landlord taxation
                    by LAN45
                    Thank you....
                    02-07-2020, 14:19 PM
                  • Tax Return - HELP!
                    by Brian862107
                    Does anyone know of any good online tutorials/guides for filling out your self-assessment tax return? I don't know about you's but I hate filling out forms (they always ask you to tick a box to say the information you've put in is correct too!!)!

                    This is my first year filling out the self-assessment...
                    01-07-2020, 15:51 PM
                  • Reply to Tax Return - HELP!
                    by jpkeates
                    I'd include the 12th month.

                    While you're correct that the income fell into the 2018/19 tax year, you didn't declare it then, which is could trigger a fine and a penalty.
                    It probably won't, but you need to be very careful with your tax - getting on the wrong side of HMRC is a lifetime...
                    02-07-2020, 08:51 AM