Buying somewhere outright before selling old place

[trisky]

My PILs need to downsize to a bungalow or similar ASAP due to a new disability. They last moved house in 1973 so there's a lot of stuff etc.

They'll be moving 30 miles or so to be near us.

Anyway, they have enough funds to buy something outright - does anyone know the tax implications? Will the old house immediately become a second home and be subject to additional tax when they sell or is there a window where that wouldn't apply?

I'd hate for them not to do it this way because of additional tax as they really need to move ASAP. They've saved a lot over the years in case they need residential care at some point so they don't want to deplete those funds on tax. They are not care home ready at the moment but do need something one level and smaller.

They will have to pay an extra 3% stamp duty upfront as it will be a second property- this can be be reclaimed if they sell the other house within 3 years I think it is.

As far as I understand it, they have six months to sell the old house before they have to pay the additional stamp duty. It is possible that they'll have to pay the additional stamp duty and then claim it back if they do sell.

With the housing market the way it is, this could be a gamble.

From a logistics point of view, it's actually really nice not to have to move on a single day. The counter side is that work expands to fit the time available, so it often takes ages to move.

They could also rent their old house potentially, then their net worth will be increasing. They would be able to use it to buy an annuity to pay for care leaving their new house intact for inheritance. Worth taking some advice I think.

Helpfully there is an sdlt calculator to work out sdlt
www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#!/intro

For the sake of the tax, it will make everyone's life significantly easier to move piece by piece and deciding what is required rather than having to take everything in one go.

It would be so much easier to buy the new place and get it ready before moving in then selling the old one.

They live in a popular area where houses are still selling well so I think theirs would sell quickly when the time came. I've offered to manage it all for them if they want.

They couldn't rent it out I don't think, it's in good nick in many ways, well maintained etc, but very dated as they've lived there 50 years and it needs a full revamp.

They're in a lucky position I realise.

Sounds like a good plan in their circumstances, assuming you can sell relatively quickly. The CGT liability would be negligible, given that they have lived in their current home for so long, or zero if they sell within 9 months as I understand it. Of course they will have to factor in two sets of bills (Council Tax, insurance etc) for however long it takes to sell. Bear in mind that you may need specialist insurance for an unoccupied property.

It sounds feasible and quite practical in terms of being able to move gradually and get possessions sorted.

Be aware that council tax will have to be paid on both properties and there's no longer an exemption for empty properties (in fact it increases the longer the property is empty!).

And most buildings insurance doesn't allow the property to be empty for more than 30 days so you'd need specialist insurance for that. We had this for a while and the property had to be visited weekly to check for leaks, damage, security etc which might be a pain from 30 miles away.

Thanks all, some good advice. I didn't realise there was no longer council tax exemption!

Regarding council tax, leave one PIL registered at the old address, and claim single occupant discount, and register the other at the new address and do the same. Normally, I would disapprove of fiddling systems in this way, but since it will be for a short period of time and you won't really be using the services at the old address, I think you get a pass 👍

I seem to recall when we did it you had to pay the full stamp duty on the purchase but could claim it back if you sold the old one within a set period. When we did it (2019) I'm sure it was longer than 6 months, but not as long as 3 years, but HMRC website would tell you what it is now.
I thin it's a good way to do it. Much less stress, and you have the whip hand with your vendors -as a genuine cash buyer you're quite attractive (no chain behind you) but if your vendor messes you about, you can tell them to get stuffed and look elsewhere without messing up a chain behind you. Same when you come to sell. And there's no stress about moving dates or booking removal vans, and you can decorate or get work done before you move in. You can also sell the old one with no more furniture in it than makes it look nice and spacious- and can even decorate it to get a better price if your house agent thinks it's worthwhile.

I think it's a good idea as long as they are prepared to market the old property at a low price to attract a quick sale