Reclaim Stamp Duty

Last time, we talked about selling your existing home to an SPV – a great tax-efficient way to fund the purchase of a new home while retaining your old home as a money-making rental property asset.

But there’s another potential advantage to transferring your home into a limited company, and that’s stamp duty savings.

Put simply, if you’re struggling to sell your home or you’d rat

her keep the property alongside your new home, selling it into an SPV can help you purchase a higher-value property while also saving money on your stamp duty costs.

Second home & SPV stamp duty costs explained

Here’s an example. Let’s say you’re looking to purchase a new residential property for £800k, but you’ve either decided against selling your current £400k residential property or you’ve been unable to find a buyer.

If you were to keep hold of your current home in your personal name and buy the £800k property as an additional property, you’ll be paying stamp duty land tax with the 3% surcharge for second home purchases.

With the stamp duty land tax rates as they stand now until April 2021, that means 3% on the first £500k and 8% on the remaining £300k. At the current stamp duty rates as they stand now until April 2021, that’s a £39,000 fee.

Now, let’s look at what happens when you set up a property investment SPV and sell the old property to the SPV. You’ll still pay stamp duty on that transaction, but only at 3%.

And here’s where it gets interesting. Since your former home is now held within the SPV, you don’t personally own it; which means your new purchase won’t be hit with the 3% second home surcharge.

Instead, you’ll pay nothing on the first £500k and only 5% on the remaining £300k. That means your total stamp duty fee across both transactions is £27,000 – a saving of £12,000!

So, you’ll be making a return on your old property via rental fees, boosting your net income thanks to the tax efficiencies of SPVs versus personal buy-to-let ownership, freeing up equity to fund your new property purchase, and getting a huge stamp duty discount on top.

Plus, if you qualify for partnership incorporation, you won’t have to worry about any stamp duty on the old property’s sale.

Second home & SPV stamp duty costs explained

Already paid? Don’t despair…

At this point, you may be thinking, “This would have been useful to know before I purchased my second home…”

Perhaps you’ve already purchased a new property alongside your old one; and you’ve wound up paying the 3% stamp duty surcharge on the new home for your troubles. Well, hope is not lost…

Did you know that you can reclaim that extra 3% stamp duty cost from the government if you sell your previous home within three years of the new home’s purchase? It’s true; and it doesn’t matter if you sell it to an individual or to your shiny new SPV limited company…

So, if you sell the property to the SPV before your three-year deadline is up, you’ll be able to claim the 3% back from your new home’s purchase, and you’ll have effectively paid your stamp duty at the standard rates. Success!

Need help with setting up an SPV and transferring your existing property into a limited company? Get in touch with our SPV company mortgage experts.

Let’s Talk