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Original poster

Feeling terrible

77 replies

Northernparsley · 03/12/2020 22:26

Just found a house and had an offer accepted - yay! We accepted an offer on our current property in September and our buyers have been waiting for us to find somewhere. In a meeting with our financial advisor today he said that as we are buying a much cheaper property than originally envisioned (a renovation project instead of the finished article), we could afford to buy the new property, convert our current house to a buy to let and still have enough money to do what we want to the new place. This makes us fully in control of the buying process without unforeseen hold ups and very likely to make the stamp duty deadline. If we don’t make the deadline it will cost us around £20,000 extra. It was a complete curveball but having done all the sums makes complete sense.

Decision is therefore made but I feel like scum. We’ve effectively strung our buyers along and then dumped them now they are of no use.

I feel like the worst person in the world right now - does the guilt subside?

OP posts:
LooseMooseHoose · 04/12/2020 19:46

Yep, it's a truly scummy thing to do. I'm sure your buyers wanted to take advantage of the stamp duty relief too. Now they almost certainly won't be able to. If you had told them in Sept, they would at least have had a chance at finding somewhere.

This happened to us last week. The day before exchange our sellers (who had already moved out into their new house) decided that they don't want to sell anymore because "it's handy to have a house near to where our friends live, we were there so long". They had only moved a 15min drive away. We have incurred £££ for nothing. And now can't afford a similar house due to price increases and SDLT considerations.

I hope karma bites you (and our sellers) on the backside hard very soon.

daisyphase · 04/12/2020 20:55

....and when you are sick and tired of the awfulness that it is to be a landlord, see sense and sell up, you will be hit with a MASSIVE capital gains tax bill, especially harsh if your property does nothing but go down in value over the next three years. (Because taxman will take a share of all the gains from when you purchased to date for each year that you no longer live there). Other people lock in those gains when they sell and pay no tax. I wish someone had explained this to my younger self.

senua · 04/12/2020 20:59

I’d worry about capital gains tax though
Why? You only pay capital gains tax if ... you make a capital gain.
Isn't a capital gain usually considered a good thing?Confused

Didthatreallyhappen · 04/12/2020 21:01

You may have to pay stamp duty on your second property.

HardAsSnails · 04/12/2020 21:04

Becoming a landlord on a whim (which is what you're doing OP) is utterly bonkers. Go ahead with your purchase and sale, and then take stock, do some proper research around the finances, legal obligations and pitfalls, and only then consider it as an option. But not like this, it's foolish (as well as a tad cunty to your buyers).

JumpingJamboree · 04/12/2020 21:07

It is a shitty thing to do. I imagine they will completely be devastated and will now have missed the boat for the stamp duty holiday if they try to buy anything else.
However, chains fall through all the time and even at the very last moment before exchange, so I suppose if you look at it that way, it isn't that bad.

Sameolesame · 04/12/2020 21:11

@senua, there is a capital gains tax hit that the OP would face. If you sell you home and the buy another you do not pay capital gains tax. If you keep your original property for more than 9 months, then you the amount you can claim back in capital gains tax starts falling. In other words you can claim back all the capital gains tax if you sell your first property within 9 months.

So the OP would gave both a stamp duty hit and forfeit paying zero capital gains tax.

Didthatreallyhappen · 04/12/2020 21:27

What would the capital gains tax be @Sameolesame?

senua · 04/12/2020 21:28

the amount you can claim back in capital gains tax
Claiming back tax?Confused
OP don't take tax advice from strangers on the internet. Ask your Financial Advisor to explain your particular case to you.

Snakeplisskensmum · 04/12/2020 21:48

Sounds like she's already had financial advice, she says in the Op. looks like the FA suggested it. Hopefully it was all explained fully.

Honeyroar · 04/12/2020 22:02

It’s a really horrible thing to do to your buyer. They’ve been polite and kind to you, waiting for you, and you’ve dropped them right in it, taking away their purchase and making them miss the stamp duty window too. It’s life, I know but you should indeed feel awful- because you absolutely have been.

Sameolesame · 04/12/2020 22:03

Yes, “claim back”. Here’s what I mean: If you dispose of your main resident you DO NOT capital gains tax.

If you do not dispose of your “original” main residence but instead now have two properties you will pay capital gains tax once you hold on to it for more than 9 months. It also depends on the number of years you lived at your previous main residence.

In terms of “claim back” if you sell the previous main residence within 9 months then you do not pay capital gains tax. Perhaps “claim back” is not the best description but you get what I mean - you no longer owe it or need to worry about it.

Sameolesame · 04/12/2020 22:06

Probably claw back is a better terminology here.

namechangeforfriday · 04/12/2020 22:09

If you don’t want to feel like scum then... don’t act like it? You’re doing a greedy, immoral and nasty thing and you should feel bad.

senua · 04/12/2020 22:11

Perhaps “claim back” is not the best description
No 'perhaps' about it. You are (I think) talking about claiming reliefs, not clawing back tax already paid.

MagicMatilda · 04/12/2020 23:05

Hmmm on this occasion it’s definitely not Rishi who is to blame

Sameolesame · 05/12/2020 10:18

@Sensa you can claim back tax. For instance, you can claim back the stamp duty paid if you sell the second property within 3 years. But yes on the capital gains, you are right the better terminology is claim relief.

AppleStars · 05/12/2020 10:27

How much have your buyers spent already? The least you can do is refund any costs they've incurred. We sale agreed 3 weeks ago and have already spent more than £1000 on survey, mortgage application / valuation fee, broker fee, solicitors deposit. Pretty rubbish thing to do but it is what is, just make your decision quickly so they can move on and find somewhere else instead of dragging the process out any longer for them.

AppleStars · 05/12/2020 10:31

@AppleStars

How much have your buyers spent already? The least you can do is refund any costs they've incurred. We sale agreed 3 weeks ago and have already spent more than £1000 on survey, mortgage application / valuation fee, broker fee, solicitors deposit. Pretty rubbish thing to do but it is what is, just make your decision quickly so they can move on and find somewhere else instead of dragging the process out any longer for them.
Maybe "the least you can do" was the wrong way to phrase that, what I mean is that it might go someway towards assuaging your guilty feeling.
ChateauMargaux · 05/12/2020 13:19

Any capital gains tax you incur will be based on the increase in value of the property, ie the profit from trading as a landlord. It will be based on the valuation when it becomes a BTL property not from when you purchased it.

Pay the buyers costs if you feel.bad.

daisyphase · 05/12/2020 13:52

Really @ChateauMargaux?
If you live somewhere for 6 years and 3 months, and it goes up in value by £300k, then you rent it out for 3 years and 9 months during which time the value stagnates, the capital gains will be based on 3/10 of £300k, ie £90k. By your scenario there would be a capital gain of zero. Can you point me to your rule anywhere, because I'd love to be wrong!

AddisonM · 05/12/2020 14:25

Eek it’s such bad karma

ChateauMargaux · 05/12/2020 15:08

Unless there is an HMRC approved valuation, it will be assumed that the gain arose evenly over the entire time the property was owned.

LIZS · 05/12/2020 15:16

Just how independent is your fa? Do they stand to gain commission on two products (btl and new mortgage) instead if one? If it was that easy you coukd just sell to your buyers with a delayed completion while you did the work. Being a ll should take more consideration, statutory obligations and how to finance void periods and ongoing maintenance.

Grenlei · 05/12/2020 15:22

Financially it's an awful decision. Plus renting out a house that's previously been your family home as a BTL is never a good idea, because you keep an emotional attachment to it, which is hard if a tenant then wrecks your carpets, scorches your kitchen worktop, or even just normal wear and tear. As has been said, becoming a landlord is definitely not something to do on a whim!

Plus morally - pretty shitty. I was in a chain years ago and the people I was buying from pulled out on the day of exchange because they didn't like the colour of the garden wall opposite the house they were intending to purchase. The wall had not changed colour, they just needed an excuse. It caused untold stress for us and the people whose house they were buying. That sort of thing ends up with it's own karma.