recoveringbuilder Posted March 21, 2019 Share Posted March 21, 2019 Don’t know if anyone will have any knowledge of this but here’s the story; I have a friend who has lived in a co ownership property since her divorce 18 years ago so she has been paying half a mortgage and rent for the other half to the company who owns the other half. She has now managed to accumulate enough money to buy herself another property outright, not a lot of money but enough to buy what she needs. she has put an offer in on a small house and had it accepted. her plans were to move her stuff gradually and get the current place tarted up a bit for selling, she has until November to either sell the current place or buy the other half of it but she wants to move nearer her work hence why she is not wanting to buy the other half. all seemed well having her offer accepted but it is cleaning her out financially, yesterday the solicitor whom she is using for the purchase informed her she would have to pay tax on the new property since she is buying it while still owning another.this is adding another 3k to her price which she cannot afford, she has been told if she sells the other property within 16 months she can claim back the tax but she cannot get her hands on another 3k. Surely since she is not the outright owner of the first property this can’t be right?any thoughts anyone? Link to comment Share on other sites More sharing options...
Ferdinand Posted March 21, 2019 Share Posted March 21, 2019 2 minutes ago, Christine Walker said: Don’t know if anyone will have any knowledge of this but here’s the story; I have a friend who has lived in a co ownership property since her divorce 18 years ago so she has been paying half a mortgage and rent for the other half to the company who owns the other half. She has now managed to accumulate enough money to buy herself another property outright, not a lot of money but enough to buy what she needs. she has put an offer in on a small house and had it accepted. her plans were to move her stuff gradually and get the current place tarted up a bit for selling, she has until November to either sell the current place or buy the other half of it but she wants to move nearer her work hence why she is not wanting to buy the other half. all seemed well having her offer accepted but it is cleaning her out financially, yesterday the solicitor whom she is using for the purchase informed her she would have to pay tax on the new property since she is buying it while still owning another.this is adding another 3k to her price which she cannot afford, she has been told if she sells the other property within 16 months she can claim back the tax but she cannot get her hands on another 3k. Surely since she is not the outright owner of the first property this can’t be right?any thoughts anyone? I thought the principle was that ownership of a shared property was treated the same as if it was a whole smaller property ie normal rules and thresholds apply. Is the 3k the supplementary stamp duty of 3% on second properties? Ferdinand Link to comment Share on other sites More sharing options...
recoveringbuilder Posted March 21, 2019 Author Share Posted March 21, 2019 I don’t know @Ferdinand, the place she’s buying is £69k and she expects the current place to be worth around the same of which only half of that will be hers , so I don’t know what the threshold is?? Link to comment Share on other sites More sharing options...
Ferdinand Posted March 21, 2019 Share Posted March 21, 2019 (edited) 3 minutes ago, Christine Walker said: I don’t know @Ferdinand, the place she’s buying is £69k and she expects the current place to be worth around the same of which only half of that will be hers , so I don’t know what the threshold is?? The 3% extra stamp duty does not apply to properties costing under £40k as one threshold, but that is to do with the price of the second property not liability for the second property tax. I think the solicitor is correct. I recall the overlap period being reduced, though I thought it was 18 months not 16. Others may add more. Ferdinand Edited March 21, 2019 by Ferdinand Link to comment Share on other sites More sharing options...
ProDave Posted March 21, 2019 Share Posted March 21, 2019 Unless the rules have changed, I thought you had 3 years to sell the other property and you could claim the extra stamp duty back (yes I know it's no longer called stamp duty but I can't keep up with the new names, especially as England and Scotland have different names for much the same thing) Since she will get the extra tax refunded, could she take out a 0% credit card and pay it on that, and then repay it in full when the other property is sold. There is an up front charge usually but it is still a cheap way of short term borrowing. Link to comment Share on other sites More sharing options...
recoveringbuilder Posted March 21, 2019 Author Share Posted March 21, 2019 Thanks, I’m trying to get her to get her skates on and get the other place on the market and drag her heels a bit on completion of the new one but she’s got herself so stressed out about this that I suspect she will withdraw her offer on the new place which is a shame because it’s in walk in condition, unfortunately I am unable to help her financially at this point in time after the build or I would have done, we’ve been friends for 35 years. Link to comment Share on other sites More sharing options...
recoveringbuilder Posted March 21, 2019 Author Share Posted March 21, 2019 My hubby said this last night @ProDave, I’ve yet to suggest it to her Link to comment Share on other sites More sharing options...
Ferdinand Posted March 21, 2019 Share Posted March 21, 2019 This is the provision I was talking about. It appears in EW you have 3 years to sell your previous property to reclaim 2nd home Stamp Duty. https://www.moneyadviceservice.org.uk/en/articles/everything-you-need-to-know-about-stamp-duty#stamp-duty-on-second-homes Has that changed in Scotland? F Link to comment Share on other sites More sharing options...
newhome Posted March 21, 2019 Share Posted March 21, 2019 27 minutes ago, Ferdinand said: Has that changed in Scotland Of course ?. It’s 4% and you only have 18 months to sell the previous property. Link to comment Share on other sites More sharing options...
ProDave Posted March 21, 2019 Share Posted March 21, 2019 @newhome Can you confirm that the bands in Scotland are "Tiered" ? i.e it is my understanding of a property sells for say £300K then £250K is charged at 2% and £50K is charged at 5% Or have they changed that as well and now if you sold for £251K the whole lot would be charged at 5%? Link to comment Share on other sites More sharing options...
newhome Posted March 21, 2019 Share Posted March 21, 2019 3 minutes ago, ProDave said: Can you confirm that the bands in Scotland are "Tiered" ? Yes tiered. Still more for the higher value properties however compared to England. 1 Link to comment Share on other sites More sharing options...
lizzie Posted March 21, 2019 Share Posted March 21, 2019 @Christine WalkerI think her lawyer is correct. I am not familiar with the detail of the Scottish system but I think it runs the same way as England & Wales SDLT. If her shared ownership property runs the same as E&W schemes then the Association that owns the other part of the property usually has the right to set the price and to have first shot at selling it (we are going through this with nephew at mo). This is how his sale works If the price set by HA is not acceptable then he would have to appeal, if they failed to sell it in the contracted 12 weeks then the right to use an open market Estate Agent can be taken up. The HA usually have waiting lists of people wanting to buy they dont usually go to open market and the price is the price not up for negotiation by buyer or seller. In nephew case he wanted to move from Hants to Wales for family reasons and so didnt want to 'staircase' (buy any bigger share even though he could have). HA were instructed to sell last October - we are now March and on the third buyer with hopes of an exchange this week. He is in danger of losing his purchase due to the incompetence of the HA in qualifying the buyers they sent! So back to your friend.....she has enough savings to buy outright but not for the fees and/or SDLT. She will still 'own' her share of the co-ownership property until it is sold. Presumably after 18 years she has some equity in it. Why not go to her bank explain the situation and ask for a personal loan to cover the shortfall....could be secured or unsecured but I would have thought her bank would help her out with this then she can repay when property sold and she recovers the tax. Or take a zero interest credit card and do it on that. Seems to me she is not short of money but has a temporary cash flow issue. 1 Link to comment Share on other sites More sharing options...
newhome Posted March 21, 2019 Share Posted March 21, 2019 In Scotland: When you purchase your new house, because you will not have sold your existing main residence, you will own two houses. You will therefore have to pay the Additional Dwelling Supplement on the purchase of your next house. However, on 2 March 2016, the Scottish Parliament's Finance Committee agreed to amend the Bill at stage 2 of the Bill process to allow for the situation where the buyer purchases their new main residence before they sell their old one. In such a situation, if the sale of the previous main residence takes place before the tax return for the purchase of the next main residence is made, no Additional Dwelling Supplement is due. If you have already submitted a return for the purchase transaction, you will, be eligible to make a claim for the repayment of the Additional Dwelling Supplement you paid once your previous house is sold, provided that completion takes place within 18 months of the purchase of your next home. Link to comment Share on other sites More sharing options...
ProDave Posted March 21, 2019 Share Posted March 21, 2019 I am glad we bought our building plot in 2014 before all this nonsense started. Otherwise we would have already gone past the date for re claiming any second property tax. As it happens we paid nothing at all as it was under the threshold of any property tax. Link to comment Share on other sites More sharing options...
bassanclan Posted March 21, 2019 Share Posted March 21, 2019 Just an aside, the second property tax does not apply to land 1 Link to comment Share on other sites More sharing options...
ProDave Posted March 21, 2019 Share Posted March 21, 2019 2 hours ago, bassanclan said: Just an aside, the second property tax does not apply to land That's handy to know for anyone buying a building plot but not planning to sell the old house straight away. Doesn't help anyone buying an old house to knock down and rebuild. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now