Owning second property briefly! Tax? Stamp duty?

[Salisburymumxxxx]

My mum is going to sell her flat and buy a new smaller one - she has the cash for her new one without needing to sell (taken out of retirement savings) so is thinking she might buy first then sell her existing flat. I agree this would be less stressful than doing it all at once and puts her in a great buying position. However, I’m trying to work out the financial implications - I assume she’ll have to pay higher rate stamp duty as it’s a second property but I assume that’s it? The flats are so cheap that it’s actually not that much money and I think worth it. She gets stressed very easily!!

Is there anything else I haven’t thought about? Thanks

I understand that you can get the additional stamp duty refunded when you sell your old property as long as it is within a certain time period ?months of the second purchase.

You pay the higher rate when buying, if you sell the other property within 3 years you can claim back the extra you paid. Not sure about any other implications since our other property is abroad.

Pretty much the same as what we're doing (or hoping to do). We'll have to pay the extra stamp duty, but you can claim it back as long as you sell your main residence within 3 years.

Oh I didn’t know you get it refunded! Amazing! How does that happen?

That might exceptional circumstances though which I’ve been told applies to our specific situation. Best bet is for her to check with her solicitor- she’ll need one anyway for the purchase!

DP and I recently bought a house and both own separate properties. We plan to sell our other properties within 3 years to ensure we get the refund.

Bear in mind you only get the stamp duty refunded if you have lived in the previous property at some point in the 36 months before buying the second property.

We did this and its 3 years you can reclaim stamp duty in. Our solicitor did this and HMRC even paid a small amount of interest on it. We did get a cgt bill each as due to covid our sale got delayed but it wasn't massive, under 1k each and also had issues with council tax during covid as we couldn't go down they marked it empty which means after 2 years they cease it and also they double council tax bill after then as well. Obviously you have 2 sets of bills as well. If her flat is fairly straightforward to sell should be fine. If no lockdown we would have escaped cgt and if there's not a big gain may well escape but worth checking rules. Also need different insurance for empty flat. But does make selling less stressful.

they cease should be they have the option to cease it

Cease is seize

Pls speak to your solicitor as they have changed the rules around CGT too. If the new home becomes her main home, she will need to sell her old place within 9 months to avoid CGT on her old place so pls bear this in mind. Here is the new change

Before April 2020, if the property had been your home at some point in the 18 months prior to the sale this part of the gain would be exempt from tax. For sales on or after 6 April 2020 this relief period is reduced to 9 months.

This change affects people who are purchasing a home before selling their old one. They now have just nine months to sell their old property to avoid a potential CGT charge.

Is she drawing down funds from a pension pot that she wouldn’t otherwise touch? You need to calculate the tax on that.

@RickiTarr The money is in her Premium Bonds and ISA, so not sure?

@TheFunBus In theory CGT shouldn’t be an issue as she would sell existing flat straightaway which shouldn’t be an issue although you never know. Even so, it would be a small amount of money.

Thanks for your advice everyone. I’ve talked to my mum about it all and she feels a bit more confident about talking to her solicitor now - it was the blind leading the blind before!

Obviously she will get proper advice and not just listen to me!

@RickiTarr The money is in her Premium Bonds and ISA, so not sure?*

Oh good. That’s much simpler than if it were in a designated pension fund.

Hi All, not sure if this is the right thread, I was wondering if any of you has come across a similar situation: we are in the process of buying a flat in London (less than £500K), it is our first property in the UK and I recently inherited my parents' house in Greece. I have never used the house as my main residence as I have been living in other countries for the past 10 years. Advice from solicitor and accountant has not been crystal clear and I wonder if I would still qualify as a FTB or not. Any opinion is more than welcome. Thanks very much!