2nd house - Stamp Duty

[Jane]

Hi all,

Looking for some advice. I'm currently looking at a 2nd property which is valued at €315K. As this is my second property I would be viewed as an investor. However, if I was to live in the 2nd property & become an owner occupier, I wouldn't have to pay stamp duty (house is less than 125sqm). But, if I let out my first house (which I purchased 3 years ago) is there a catch here?

Thanks to advise,
Jane

 

[ClubMan]

Looking for some advice. I'm currently looking at a 2nd property which is valued at €315K. As this is my second property I would be viewed as an investor. However, if I was to live in the 2nd property & become an owner occupier, I wouldn't have to pay stamp duty (house is less than 125sqm).

Is this second property new or second hand? If it's new then for an owner occupier (first time buyer or not) it would be exempt from stamp duty but if it is second hand then only a first time buyer would be exempt from stamp duty while a non FTB would pay 5%. See .

But, if I let out my first house (which I purchased 3 years ago) is there a catch here?

If you let it out within five years of purchase then you will be subject to a clawback of stamp duty on this property. See the OASIS link above for more on this. Also, some portion of the eventual resale gain will be assessable for capital gains tax and the normal investment property tax treatment will apply as long as it is not your PPR. If the property is rented out then your mortgage lender may need to be informed and you will need alternative insurance cover since the normal owner occupier policy will most likely no longer cover it. There may be other implications too.

 

[Jane]

Is this second property new or second hand?

Sorry, should have said this. It's new.

If you let it out within five years of purchase then you will be subject to a clawback of stamp duty on this property

Couple of questions on that;

1) Even though I wouldn't have been subject to Stamp Duty at the time?
2) How do they calculate the 5 year period? Is this from when I moved in or when I signed the contract?

Thanks Clubman, I may have to re-think this. I need to figure out which is the "cheaper" route to go !!

 

[ClubMan]

1) Even though I wouldn't have been subject to Stamp Duty at the time?

Yes - see the OASIS link for an explanation of the clawback. Basically if you buy as an owner occupier but subsequently rent the property out (other than under the owner occupier rent a room scheme) within five years of purchase then you are liable for the stamp duty that an investor would have paid on the same purchase at the time.

2) How do they calculate the 5 year period? Is this from when I moved in or when I signed the contract?

I presume it's from the date that the sale closed which may predate your move into the property.

Thanks Clubman, I may have to re-think this. I need to figure out which is the "cheaper" route to go !!

If in doubt get independent professional advice on the tax and general investment issues involved. There are many other threads here on AAM about buying a new property while retaining the original PPR as an investment which might be worth rooting out and reading too.

 

[Jane]

Just one last question !!

within five years of purchase then you are liable for the stamp duty that an investor would have paid on the same purchase at the time.

So, when I bought the house it was £129,000 (€163,830) I'd be subject to a 3% clawback on the nett value of the house?

Seems like it might be in my interest to go this route !

But, I'd be stung again if I was to rent out the 2nd house in later years. So it might be in my interest to just pay the stamp duty on the 2nd house & rent it out immediately.

I've been reading through the other threads alright & I've definitely learned some things I didn't know. Thanks again.
J

 

[ClubMan]

So, when I bought the house it was £129,000 (€163,830) I'd be subject to a 3% clawback on the nett value of the house?

You need to check what the applicable rate of investor stamp duty was in the year of puchase and that determines what the clawback will be. If in doubt ask Revenue.

Seems like it might be in my interest to go this route !

But, I'd be stung again if I was to rent out the 2nd house in later years. So it might be in my interest to just pay the stamp duty on the 2nd house & rent it out immediately.

You seem to be contradicting yourself there. If you did live in the new house and eventually rent it out within five years of purchase then the same stamp duty clawback would indeed apply. Whether or not one approach is better than the other depends on a lot more than you have posted so far so it's not really possible for somebody like me to comment.

I have not dealt with the broader issue of the advisibility or otherwise of concentrating so much of your overall wealth in a single asset class and geographic region (i.e. property in the one area) versus diversifying across a broader range of asset classes and risk/reward profiles. If you are not sure that further property investment is indeed the most suitable strategy for you based on your overall personal and financial situation and goals then you should talk to an independent financial advisor to get more comprehensive advice.

Hope this helps.

 

[Jane]

Clubman, no its fine. My intention was to rent out the first house, after I bought the 2nd house so I was making money while doing up the 2nd house. Then I intended to rent out the 2nd house. It seems as if this was wishful thinking on my behalf !

 

[ClubMan]

I don't understand the bit about "wishful thinking". The main, seemingly unanticipated, issue here is that if you are buying these properties as rental investments then you will have to pay investor stamp duty unless you buy them as an owner occupier and live in them for five years first.

 

[Jane]

It's simply trying to way up which way to go in order to achieve the least amount of investor stamp duty.