Will new stamp duty rules ap­ply to ex­pats?

The Daily Telegraph - Your Money - - MONEY -

I read that the Gov­ern­ment wants to add a stamp duty sur­charge of up to three per­cent­age points for over­seas buy­ers. My daugh­ter is British, but lives in France. If she moves back next year and buys a house, will she pay this? MB, VIA EMAIL

Theresa May an­nounced this plan, ex­pected to raise £170m a year, at the Con­ser­va­tive party con­fer­ence. The de­tail is light but as things stand your daugh­ter will pay the ex­tra charge.

Philip Munro of With­ers, a law firm, said: “British ex­pats are one of the groups po­ten­tially ad­versely af­fected by this mea­sure, if it is im­ple­mented. Ex­pats are, by def­i­ni­tion, non-UK res­i­dent, but will of­ten con­sider the pur­chase of a prop­erty to live in on their re­turn to the UK.”

Any­one buy­ing a sec­ond home worth £250,000 would cur­rently pay £10,000 in stamp duty. This would in­clude the ex­ist­ing sur­charge on sec­ond homes. If an ad­di­tional levy was brought in on top of this, then the tax paid in this ex­am­ple would be £16,249.

The first caveat is that this is a pro­posal and there is no date for en­forc­ing it yet. If your daugh­ter buys be­fore the pol­icy comes in, she may dodge the ex­tra stamp duty. The sec­ond is that the de­tails have yet to be thrashed out. The idea be­hind the pol­icy is to help na­tion­als buy houses with­out so much com­pe­ti­tion from over­seas in­vestors, so the fi­nal word­ing may ex­clude British ex­pats.

A fi­nal caveat is that the level of any sur­charge is also up for de­bate, and it may not be as high as three per­cent­age points, so even if your daugh­ter does end up pay­ing, it may not be too pun­ish­ing.

The cur­rent stamp duty sys­tem is al­ready tricky to un­der­stand and has led to many buy­ers over­pay­ing then fac­ing long de­lays for a re­fund. Hope­fully your daugh­ter will avoid this.

Our fi­nance re­porters and Adam an­swer read­ers’ ques­tions. This week: prop­erty

tax year, when the tax ben­e­fits are high­est? My mort­gage is for £250,000. HK, VIA EMAIL

Many land­lords are fac­ing in­creased costs as the Gov­ern­ment re­moves tax breaks. Pre­vi­ously, prop­erty in­vestors were al­lowed to deduct all their costs and mort­gage in­ter­est pay­ments as ex­penses, re­duc­ing their tax li­a­bil­ity.

How­ever, changes that will be phased in en­tirely by April 2020 mean this re­lief will ap­ply at the ba­sic rate of tax only, rather than the land­lord’s mar­ginal rate.

Spend­ing more in the cur­rent tax year, when the re­lief is at its great­est, while re­duc­ing costs in fu­ture tax years, is one way land­lords could take ad­van­tage of th­ese favourable tax con­di­tions while they last.

Leeds Build­ing So­ci­ety is one lender that has launched a buy-to-let mort­gage with a high fee and low on­go­ing rate. Land­lords tak­ing out this loan would be charged a hefty £2,499 fee but would ben­e­fit from a low, fixed in­ter­est rate of 1.44pc un­til Au­gust 2020.

This could po­ten­tially be tax ef­fi­cient as you are spend­ing more money that can be off­set against tax in the years where you can re­ceive the most re­lief.

Ali­son Page, un­til re­cently a prop­erty tax ex­pert at the Prop­erty Hub, com­pared the over­all cost of this mort­gage with a low-fee, higher-rate prod­uct from Post Of­fice Money.

For ex­am­ple, a prod­uct re­cently of­fered by Post Of­fice Money had a cheaper £495 up­front fee but the in­ter­est rate was 1.66pc, fixed un­til Septem­ber 2020. Us­ing your £250,000 loan as an ex­am­ple, Miss Page said the Leeds mort­gage would cost a high­er­rate tax­payer £7,331 be­tween now and the end of the taper, af­ter tax re­lief of £2,695 is de­ducted.

How­ever, the Post Of­fice Money loan would still have worked out cheaper. De­spite this mort­gage be­ing el­i­gi­ble for a smaller level of tax re­lief – £2,457 – the over­all cost over the fixed term is much lower at £7,045.

But Miss Page said that over a two-year term the Post Of­fice loan will be more cost-ef­fec­tive than the Leeds op­tion, as although the tax re­lief is lower, the to­tal ex­pense is also lower.

Ba­sic and ad­di­tional-rate (45pc) tax­pay­ers would also be bet­ter off tak­ing out the Post Of­fice Money mort­gage in this in­stance.

How­ever, for some smaller loans it may be more tax ef­fi­cient to take out a high-fee, low-rate mort­gage.

In your case, Miss Page said you should re­mem­ber to re­mort­gage af­ter the two-year fixed rate pe­riod is up to en­sure your costs re­main as low as pos­si­ble.

‘No one, not even HMRC, can give me an an­swer’

Sec­ond home own­ers paid £4bn in stamp duty in 2017-18

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.