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Stamp Duty

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pinkcows | 16:41 Fri 05th Jun 2020 | Property
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Hi...my husband has inherited a house..we need to knock it down and rebuild it..the land is worth 100,000, we have been told we have to pay 1250 stamp duty??

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>>> from what i can see, you have to pay 3% on anything over 40k for a second home Not exactly. If a second home is worth less than £40k you pay nothing but if it's worth over £40k (up to £125k) you pay 3% of the whole value (including the first £40k). >>> Is it because i am not on the deeds as an owner? It's likely to be exactly the opposite. i.e. for you and your husband to...
17:12 Fri 05th Jun 2020
ok by who?
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Mortgage provider?
Is it because i am not on the deeds as an owner?
it will be because it's (presumably) your second home, where an uplift is levied on sd
from what i can see, you have to pay 3% on anything over 40k for a second home. But don't trust me, trust your mortgage person who has more experience
i just went onto the .gov calculator where it doesnt say anything about the first 40k being disregarded, and made it £3000.
Just ask your mortgage person to explain where they got the figures
>>> from what i can see, you have to pay 3% on anything over 40k for a second home

Not exactly. If a second home is worth less than £40k you pay nothing but if it's worth over £40k (up to £125k) you pay 3% of the whole value (including the first £40k).


>>> Is it because i am not on the deeds as an owner?

It's likely to be exactly the opposite. i.e. for you and your husband to hold a joint mortgage on the property (which is currently registerd in his name only), your name will have to be added to the deeds as a co-owner (either as 'joint tenants' or with a 'tenancy in common').

So you'll be acquiring half the property, with a 'chargeable consideration' equal to half of its value. So you get stung for 3% of half of the value of the property.

If the full 'chargeable consideration' of the property is assessed at the value of the land (£100k) then your half will be worth £50k, resulting in you having to pay £1500 in SDLT. So, since the SDLT figure you've been quoted is less than that, it appears that the current value of the existing property (rather than the land it stands upon) has been calculated as somewhat less than £100k.

If, as it appears it has, the value of the house has been estimated at £93,500, then the chargeable value of the half that's transferred to you will be £41,750, with you having to pay 3% SDLT on that sum (= £1252.50)
"...we need to knock it down and rebuild it..." Is that by choice or stipulation by others, whom ?
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Hi..ahh that makes sense now!
Yes its an old airey house which never got the strictursl work done in the 80s like most did...its unmortgageable and not structurally safe..we have tried allsorts and have decided to knockit down and detach it,less costs than trying to get the structursl work done and add the extension..hopefully be worth just over 300g when finished.
But you're not buying anything are you. I'm not an expert on SD but my understanding is the purchaser pays the required tax on the cost of the purchase. If you had bought the property and intended to develop the site then an additional 3% SD would be payable on the purchase. But, from the .gov website:

"You don’t pay Stamp Duty, Income Tax or Capital Gains Tax on a property you inherit when you inherit it."

I'm by no means saying I'm correct because I don't know all the ins and outs. But SD - including the additional 3% levied on additional properties - is charged on purchases and you're not purchasing anything. So how does your mortgage provider explain the SD charge?
//its unmortgageable and not structurally safe.//

Then I think this introduces another angle because I believe that SD is not levied at all if the property is not fit for use as a dwelling. I also understand that it is not payable on the transfer of deeds (without payment) to somebody else. If you are changing the ownership from your husband to your partnership (as "joint tenants") then that exemption may well apply. I think you need to get expert advice and I'm not so sure your mortgage provider is best placed.
>>> But, from the .gov website:
"You don’t pay Stamp Duty, Income Tax or Capital Gains Tax on a property you inherit when you inherit it."

I don't think that's in dispute, NJ.

Mr Pinkcows definitely inherits the property free of SDLT. However if he needs to borrow money based upon a mortgage on the property (which would seem to be possibly relevant here, as there's clearly a mortgage lender involved in the situation somehow) and can't afford to take on that mortgage solely in his own right, he'll need to transfer half of the title to the property to Mrs Pinkcows, in order that they can get a joint mortgage. It's that transfer that is subject to SDLT.

This link, from the Government-funded Money Advice service would seem to support that view:
https://www.moneyadviceservice.org.uk/en/articles/stamp-duty-land-tax-transfer-ownership-land-property-england-northern-ireland
(See the somewhat analogous situation under 'The transfer is over the threshold' but note that the SDLT rate of 2% referred to there is for a sole home in the relavent price range. The rate in Pincows case is initially 0% - because the value of the property is less than £125k - but with 3% added on top because it's classed as a second home).
But...(again from .gov)

"If you get property as a gift you won’t pay SDLT as long as there’s no outstanding mortgage on it. But if you take over some or all of an existing mortgage, you’ll pay SDLT if the value of the mortgage is over the SDLT threshold."

Presumably there is no outstanding mortgage so if the Mr Pinkcows gifts half of the property to his wife, then I read it that no SD is payable. This indicates to me that the test to see whether SD is payable is whether there is a mortgage outstanding at the time of the gift.
Yes, NJ, the problem we've got here is that we don't know whether there was an existing mortgage on the property when Mr Pinkcows inherited it (which Mr & Mrs Pinkcows are now seeking to take over) or whether Mr & Mrs P are seeking a new mortgage in order to redevelop the site after Mr P has inherited it. It might well make a difference.
No we don't know that, 'Chico, and it would make all the difference.
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No there was no mortgage...my husband bought it for his grandma outright for 18g in the early 90s off the council..
I think that my original summary of the likely position holds then.
// I think that my original summary of the likely position holds then. //

Are you sure, 'Chico?

Mr pinkcows can gift half of the property he inherited to Mrs pinkcows with no "consideration". Since there is no outstanding mortgage then no SD will be payable.
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Judge really? He can gift it me?
But 'consideration' and 'chargeable value' (upon which SDLT is charged) aren't the same thing, NJ.

If Mr P was to simply gift half of the property to Mrs P without her taking on any responsibility for the mortgage to be placed upon it, then there would be no chargeable value for SDLT purposes.

However if Mrs P's name is to be on the mortgage as well, then she has acquired a chargeable consideration, which attracts SDLT.

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