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Original poster

Second home tax advice?

80 replies

Hemberley · 05/02/2021 18:24

I wasn't sure whether to post here or in the Money topic but here goes....

DH and I are selling our current home and using the proceeds to purchase two properties. We will have the less expensive of the two new places as the "second home", but what happens if we complete on the more expensive property AFTER the cheaper one? Would the more expensive one then become the second home, and therefore subject to the extra 3% SDLT? If anyone has any knowledge I would be very grateful - can't find info on timings like this on HMRC website.

OP posts:
HintOfVintagePink · 06/02/2021 21:27

All the arguments about timing of occupation are a red herring.

OP, if you complete on the cheaper, non main residence first then you will pay SDLT at the 3% surcharge. You own two homes at this point; your current home and the ‘non residence’. All completed.

You then buy the more expensive, ‘residence’ property whilst simultaneously selling your current home. This is deemed as replacement of main residence, so you will pay SDLT at the standard rate, without the 3% surcharge.

You now own two properties again; one you have paid the 3% on quite rightly because it’s not your main residence, and your main residence that you paid the standard rate.

The short answer is, yes, you can buy a second home first.

Your conveyancer/solicitor should have a basic grasp of this. It is not complex tax advice.

Original poster
Hemberley · 06/02/2021 21:40

@HintOfVintagePink thank you but I don't see how we can complete on EITHER property if we still own our current residence. As I've said, the sale of our current home will fund the purchase of both of the new properties. So completing on the second home first will by default mean it is our only home because our current home will have been sold.Or am I missing something ?

OP posts:
Silkiechickscat · 06/02/2021 22:55

If you speak to a financial advisor they would be able to advise on possible ways of financing this and it may well be possible but it may not be the best solution as there will be costs involved with the financing and added risk. In our case we used an interest only mortgage as that was what financial advisor recommended as best solution but we only needed 30% (financial advisor will know what percentage you can get up to, think at time was around 70% but may well be less now). There will be different solutions depending on exact finances. Our advisor charged £300 so pretty cheap.

VanGoghsDog · 07/02/2021 00:38

Just buy the main home first. Move. Then buy the cheaper second home which is surely less important anyway?

VanGoghsDog · 07/02/2021 00:40

She doesn't need financing advice or mortgage advice, she needs tax advice. An IFA won't give tax advice.

Silkiechickscat · 07/02/2021 01:03

I didn't suggest an IFA for tax advice if you read what I wrote and I also suggested tax advice before, OP has said she doesn't want to pay for tax advice.

Original poster
Hemberley · 07/02/2021 09:10

@VanGoghsDog

Just buy the main home first. Move. Then buy the cheaper second home which is surely less important anyway?
Yes ideally this is what I'm aiming for. However my concern is that the second home purchase is moving faster. It would be great to just move there and then wait for the main home purchase, but this is the whole problem. Because then the proposed main home becomes the second home. (Or does it?!!- that's what this thread is about)!
OP posts:
Original poster
Hemberley · 07/02/2021 09:11

PS. We don't need any mortgages.

OP posts:
Original poster
Hemberley · 07/02/2021 09:45

On further research and using the useful link from @Dogsandbabies it seems that the following is the case:

In the scenario that property 2 (cheaper) completes before property 1 (more expensive) we CAN avoid the extra 3% being payable on property 1 as long as we don't live in property 2. So where do we live in the meantime?? As I've said, renting is not really a good idea for us BUT we could store a load of stuff at property 2 and go to an air bnb or something. ....?

(Reasons why renting not desirable: storage costs, dog & cat, signing up for a 6 months leasehold and all the associated expenses and upheaval, ill husband working from home, adult daughter working from home and undergoing endless zoom interviews and associated stress).

Of course, the ideal scenario is that property 1 completes first. BUT there is a chain there, property 2 is chain free and they want to get going so there's a chance they will end up selling to someone else, and finally, I am concerned we will lose our buyers (they're chain free) if they are forced to wait for us to complete on property 1.

Sorry, that's a bit of a brain dump.

OP posts:
VanGoghsDog · 07/02/2021 13:42

@Silkiechickscat

I didn't suggest an IFA for tax advice if you read what I wrote and I also suggested tax advice before, OP has said she doesn't want to pay for tax advice.
So, your post is entirely irrelevant then.
VanGoghsDog · 07/02/2021 13:46

To be honest, if you can buy two properties with no mortgage then you really should be paying for decent bespoke tax advice. Budget £1k for it and get the information you need based on your own circs.

daisyphase · 07/02/2021 15:44

OP, google Arthur Weller, he does phone call property tax advice for £175 per hour, min £97 plus VAT. I used him for something (twice) a few years ago, and I was googling him today because I might be looking for a little property tax advice soon. Honestly, there is a ton of misunderstanding on this thread. Your question is very simple for a genuine property tax advisor to answer. It'll cost you £97 + VAT to get a proper way forward.
No connection to him.

Original poster
Hemberley · 07/02/2021 17:31

@daisyphase thank you - he looks good. I will see what quote I get from the local people as well. Not needing a mortgage doesn't mean we have money to burn.

OP posts:
VanGoghsDog · 07/02/2021 17:53

[quote Hemberley]@daisyphase thank you - he looks good. I will see what quote I get from the local people as well. Not needing a mortgage doesn't mean we have money to burn.[/quote]
You wouldn't be 'burning it' and it does mean you must be fairly well off. You'd be burning money by NOT taking decent advice.

Original poster
Hemberley · 08/02/2021 09:51

I agree we need proper advice - this thread confirms it - but wealthy we are not! All our "wealth" is tied up in property and will be depleted by stamp duties anyway. We have fairly low income hence I am loathe to budget £1000 for tax advice Unless it is completely unavoidable.

OP posts:
VanGoghsDog · 08/02/2021 12:41

Pretty shocked at someone about to buy two homes with no mortgage thinking they are not wealthy.

If your income is a problem, buy one home and use the rest of the money to live off. These are just normal costs of home ownership to be honest.

DinoHat · 08/02/2021 12:45

@VanGoghsDog

Pretty shocked at someone about to buy two homes with no mortgage thinking they are not wealthy.

If your income is a problem, buy one home and use the rest of the money to live off. These are just normal costs of home ownership to be honest.

OP wasn’t looking for wealth management advice.
VanGoghsDog · 08/02/2021 12:49

I didn't offer wealth management advice, so that's lucky. She obviously doesn't need it because she's not wealthy.

DinoHat · 08/02/2021 12:53

If your income is a problem, buy one home and use the rest of the money to live off.

Whatever you want to call it it’s unsolicited advice that clearly goes beyond that the OP was asking for.

Alarae · 08/02/2021 12:58

I work in private client tax and while I have an idea of what I think it would be, this is one you really should get some quick advice on otherwise it could cost you a lot.

Spend a little now, or perhaps not and end up having to spend a lot later to fix mistakes.

Original poster
Hemberley · 08/02/2021 13:57

@Alarae

I work in private client tax and while I have an idea of what I think it would be, this is one you really should get some quick advice on otherwise it could cost you a lot.

Spend a little now, or perhaps not and end up having to spend a lot later to fix mistakes.

Thank you - I will certainly get some professional advice if it looks like property 2 may complete first.
OP posts:
Original poster
Hemberley · 08/02/2021 14:48

@DinoHat

If your income is a problem, buy one home and use the rest of the money to live off.

Whatever you want to call it it’s unsolicited advice that clearly goes beyond that the OP was asking for.

Crazy advice!! You don't live off capital! Our income isn't majorly high but it's enough to live off thanks. I just don't want to spend more than we have to on advisors. I think a half hour phone call with an expert will be enough actually.
OP posts:
VanGoghsDog · 08/02/2021 16:23

@DinoHat

If your income is a problem, buy one home and use the rest of the money to live off.

Whatever you want to call it it’s unsolicited advice that clearly goes beyond that the OP was asking for.

What they were originally asking, THEY brought into the equation that they have a low income.
Original poster
Hemberley · 08/02/2021 17:07

Where did i say we have a low income ? Confused

Thanks everyone for your help.

OP posts:
VanGoghsDog · 09/02/2021 22:43

We have fairly low income

09.51 yesterday.

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