Thinking of buying a new home in the future? It’s worth giving a thought to the new Land and Building Transaction Tax (LBTT) rules now
There has been much discussion in the press regarding the 3% uplift in LBTT for investors buying property to let.
However, perhaps an unintended result of the legislation is that in some instances, if you already have a property the tax may apply to an additional property even if the property you are buying will be your own home.
Where you have not sold your existing main residence before buying a new home you will still own two properties at the same time. Although there is allowed to be a 30 day delay before the LBTT return paperwork needs to be submitted to the Inland Revenue any further delay may mean that you have to pay the additional 3% tax. However if you sell your original home within 18 months then you can ask to have the 3% uplift in tax refunded. This may create cash flow problems and if you still have two properties after 18 months then you will not be able to reclaim the additional 3% tax which may impact on properties bought as renovation projects.
The 3% uplift in LBTT should also be a consideration if you are moving in with a new partner and one or both of you intend keeping an existing home. The legislation guidelines state that “where there are joint buyers of a dwelling and either or both own an existing main residence, unless both of the joint buyers have sold (replaced) their previous main residence before (or on the same day that) they acquire the new dwelling, the ADS (additional tax) will apply”.
Where the 3% uplift in LBTT applys there will be no zero rated threshold but it should be borne in mind that the reasons for buying a new home are paramount and the tax situation should only be a consideration. However it is worth being prepared when working out your finances. If you would like referred to our tax expert for further information please call Pauline or Angela.
Help is at hand