Updating post from Reddit.
I already have a similar post going with some very helpful responses but I’m still finding some contradicting information on various tax sites.
Background:
I own a BTL that I have already paid higher stamp duty on and we also have a residential we currently reside in.
I want to buy a new residential and transfer my current residential to a BTL/LTD.
If I transfer the current resi to a BTL/LTD before I purchase the new resi, will I pay standard or higher rate of land tax? Or will I pay no land tax because I’m transferring my only residential property to my company that has no other properties?
If a transfer and then buy a new residential will I then pay the the higher rate on the new resi or just the standard rate?
Soooo confused what order to do what!! Spoke with a couple of accountants and even they give me different answers!! I have no idea what to do!
Many thanks
You’re not transferring, you’re selling the property to the Ltd Co so higher rate stamp duty is payable (again, this time by the Ltd Co) plus CGT on any personal gain. Company also pays higher rate duty on the second purchase. At least that’s as I understand it.
Exactly this but I think the higher rate stamp duty is for every property a limited company buys so the first one will have a big bill. If op has a mortgage they would effectively need to seed the company a directors loan to the company as a deposit then buy at fair market value with a specialist mortgage for commercial buying residential can't just sell it to the company for £1 or keep the current mortgage. Selling it would also trigger early repayment fees with the mortgage mine for example wants all interest for remaining amount of the term. If op has student loan this could also trigger payments for that.
No CGT when selling resi
The capital gains tax relief is just for a property you live in or have lived in (assuming you haven't rented them out in the meantime), not for investment properties even if they're residential.
Yes, but he also wants to transfer (ie sell) his current BTL to the Ltd.
Limited companies always pay higher rate of stamp duty when buying properties. You'll be buying it at a fair market value
You won't pay personal CGT if it has been your main residence
This is my understanding and will always pay the higher rate for any property purchases under a LTD. Would the onward purchase for a new resi in my name be at the standard or higher rate? What are anyone thoughts on this step? Thanks guys
You'll pay standard stamp duty as long as you don't own any other homes in your name (Ltd company homes aren't in your name so don't count)
Thank you.
If you sell the resi to a Ltd the Ltd will pay higher SDLT but you won’t pay higher for your new resi as you’ve sold your old resi.
I was in a similar position last yr. Got as far as creating the Ltd company and paying initial fees for solicitors but the numbers just weren’t adding up if we want to sell in 10/20yrs So kept it and have 2yrs left if we want to sell to claim back the extra SDLT we had to pay on our resi. Perfect solution would be the current tenants buying it but that’s a pipe dream 😆
So, the way I see this is, simply stated, the ltd company that you are a director of is going to raise a commercial mortgage and buy your current personal primary residence. In this scenario for accounting purposes the property is purchased at full market value, and the higher rate of stamp duty for LTD companies is paid, it's up to you and your lender how much mortgage you can raise against the property, but the difference between the mortgage and the market value is shown as a directors loan. There'll be no capital gains tax to pay as you've essentially just sold your primary residence. When you buy your new property you'll just pay standard rate stamp duty, because it's your primary residence.
From an established tax site.
“Since you have lived in it as your main residence for all the eighteen years that you have owned it, you will incur no CGT on the sale to your company.”