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Original poster

Stamp duty if we don't sell an inherited property but buy a new house

24 replies

WhoNose88 · 30/01/2019 19:15

Full story - DH has inherited half a house. His brother (who was the main carer for their Dad for the last year or two and owns the other half) would like to live in it, possibly for a few years.

All fine so far. However, we were going to move from our pokey flat to a house this year or next, so the kids could finally have their own rooms, and will just about have funds for normal stamp duty but not enough for stamp duty plus 3%, which since we live in London would be a hefty extra sum.

Our flat has not gone up in value since we bought it two years ago, and may well have gone down, but we've got a little equity in the flat, maybe enough for a 10% deposit plus stamp duty (at a stretch) on the house we were going to buy.

Brother would be living rent free in the house if he stayed there, and can't afford to buy us out.

So - is there a way we could move without paying the 2nd home surcharge (especially as it will be our only home) and without selling DH's part of the house, or would we have to either sell it or not move at all?

OP posts:

Original poster

WhoNose88 · 30/01/2019 19:33

Anyone?

OP posts:

ILoveDamon · 30/01/2019 19:36

Are you selling your flat? If so you should be ok as you're disposing of your main residence.

If you were in rented then the inherited house would.count as your main residence even if you've never live there. Check the specifics with your conveyencer though.

Watto1 · 30/01/2019 19:36

The second home charge doesn’t apply if you are simply moving your main residence. I inherited my mums house which I rent out. Last year dh and I moved. The higher rate didn’t apply as we were moving our own home.

Original poster

WhoNose88 · 30/01/2019 19:40

Thanks, that's brilliant news!

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DeRigueurMortis · 30/01/2019 19:57

You need to consider capital gains tax.

If your DH's brother lives in it when you eventually sell he won't be liable as it's his main residence.

Your DH on the other hand would be and this would significantly reduce his inheritance.

You definitely need to think about this aspect of you decide.

HerRoyalNotness · 30/01/2019 19:59

I think BIL should pay rent on the half that is your DHs too. Unless he’s going to take sole responsibility for insurance costs and maintenenCe etc while he lives there rent free

DeRigueurMortis · 30/01/2019 20:05

Sorry "before" you decide.

I'd also think about how long you want this situation to continue - it sounds very open ended.

What if your H's brother is still living there rent free in 5 years?

What if a big bill comes in (new roof for example?) are you expecting to pay half?

What if the property needs improvement before being put on the market?

What if it's value goes down?

Your taking a lot of risk for no benefit.

Tbh I'd sell and move on.

senua · 30/01/2019 20:18

Brother would be living rent free in the house if he stayed there, and can't afford to buy us out.
It's all very well living in his half rent-free but I don't see why your half should be rent free! Get a lodger in.
Plus what mortis said. In spades.

Original poster

WhoNose88 · 30/01/2019 20:27

Thanks for all the advice - I didn't realise about the capital gains tax, and I take your point about the rent. DH and I will definitely need to talk I think.

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irregularegular · 30/01/2019 20:33

you will only pay CGT on the increase in value between inheriting and selling (minus any costs). So it doesn't decrease the value of your inheritance as such.

DeRigueurMortis · 30/01/2019 21:26

Yes but still get a big bill which the OP wasn't expecting.

OP you really need to see a solicitor and understand fully all the ramifications.

This sort of casual arrangement can go TU very quickly and cause huge fallouts down the line.

Original poster

WhoNose88 · 31/01/2019 10:35

Thanks, I talked to DH last night and said he should definitely have a decent solicitor go through everything.

They were going to do it all on the cheap, and were even talking about doing it all themselves (!) because he thinks that their verbal agreement is fine and they'll each remember what they said in 3-5 years. I'm not so sure - memories aren't always reliable, the wording on any documents needs to be tight, and things may have changed by then! I'm hoping he took in what I was saying.

If I can ask one other question - would we be able to use the ownership of the property as collateral when we buy our next house in any way, maybe to make the mortgage cheaper?

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Original poster

WhoNose88 · 31/01/2019 10:36

This would be despite having no income from it.

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DeRigueurMortis · 31/01/2019 13:07

That's something you need to ask an expert but tbh I'd very much doubt it as it's not an asset your DH solely owns.

What if the lender had to use this collateral but your BIL refused to sell?

At the very least you'd have to get him to agree to it being used for this purpose (and if I was him there's not way I would do this).

Upshot you're creating a very complex set up here as it is without making even more so.

I'm not sure what the motivation is here.

You sound like you need to money now to finance your move. I don't understand the reason for delaying a sale.

PeachPotato · 31/01/2019 14:19

On the capital gains front, make a note of all money you spend on the house between inheriting and selling as this can be offset against your tax. You could also put Dh’s half in both your names as you each get a CGT allowance.

BubblesBuddy · 31/01/2019 15:54

I think you are supplying housing to your BIL as a social service to him. That’s laudable but can you really afford this? Should he not use his share of the house to buy a 1 bed flat or studio? I think this needs further discussion and I do think that, unless you have a formal legal agreement, you are opening up a can of worms and grief down the road.

You may not have to pay much CGT if the house doesn’t go up in value and your DH could give half his share to you so each of you get the CGT allowance.

However you need to have a full and frank discussion with the BIL so you can draw up a legal agreement covering all the aspects of this arrangement as mentioned above.

MrsPatmore · 31/01/2019 15:58

Could you swap places ie; 'sell' your flat to the brother, take full ownership of the house then sell it if you need a different sort of house?

Japanesejazz · 31/01/2019 21:06

You need to seek legal advice. If your partner and his brother are tenants in common on the inherited property ( which they need to be) you will be caught by by 2nd home stamp duty, unless your onward purchase goes in your name only. But your situation is far too complex for you to receive accurate advice here where we do not have access to all the relevant paperwork.

ForgivenessIsDivine · 01/02/2019 06:59

Think carefully and so the down with someone who can talk you through all the options..

The capital gains will be paid out of any increase in value from now so it will be put of cash you receive from the sale. Though might be a good idea to get an agreement from BIL that he will have his share reduced so that both parties walk away with the same amount of cash at the end of the transaction.

sm40 · 01/02/2019 07:06

My dim
Has this and my aunt lives in the house. It's in a proper trust. Annoys my mum
That she can't access her money but then it was my aunts house and she won't leave unless I'm a coffin!
As for capital gains. Yes it reduces the inheritance but that was all 'profit' so you still receive a lump sum you didn't have!

Puggles123 · 01/02/2019 07:11

Tricky one, seems you are doing the sensible thing and checking everything with a solicitor though. I would ask the brother to pay a small amount of ‘rent’ but keep it in savings should any repairs/unexpected costs creep up. As he is living there he could pay them in theory, but not sure if in terms of retaining clear half ownership it’s better to pay half? Definitely get an agreement in writing as well, he may not be able to afford a mortgage but shouldn’t be living there for nothing unless he is in dire straights.

TheRedRoom · 01/02/2019 07:11

I think your bil should pay rent for use of your dh's share - ie he wouldn't pay full rate for the property but half to cover the half he doesn't own. Anything else seems unfair.

anniehm · 01/02/2019 07:17

When you apply for a mortgage you will need to declare the interest in the property and and liabilities you have with it - are you responsible for maintenance? Definitely get an agreement drawn up between dh and bil, stating that he covers council tax, utility bills, building insurance etc and also state that the house will be sold in x number of years unless the agreement is renewed so there's a mechanism for forcing the sale already built in.

Original poster

WhoNose88 · 01/02/2019 09:35

BIL has been looking after their Dad, recently most days as 24h care and sleeping in (with DH taking over from him every so often, about 1 weekend in 3, to give him a night off) so DH feels indebted. The rent free living for a couple of years is non-negotiable, which I understand, but I've put the case that we are not in a position that we can let him have it indefinitely.

BIL says he can pay off his half by using equity release against the house in a couple of years (when he reaches 55) but - a) I doubt if he'll be able to take that much out at that age and b) That would mean the house gets taken by the bank when he dies so nothing is left for his daughter.

Unfortunately we can't swap @MrsPatmore as the kids are in school in London and DH and BIL's house is on the coast.

They're both still grieving, so not thinking straight, but I'm trying to stop them from doing something that they'll regret.

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