Investment property / First Time Buyer / Stamp Duty query

[JulesDub]

I bought my first and only property a few years ago as an investment. I have never lived there and have not been claiming tax relief at source on it. Since then I have been renting it out, and have been renting somewhere else myself. I am now considering selling this investment property and buying a new house of my own to live in (i.e. not an investment, but as a principal residence).

My question concerns the tax implications of this, and the stamp duty implications of buying a house for myself.

I have made some money on the investment property, so I believe that I may be liable for Capital Gains Tax once I dispose of it. However, am I then regarded as a First Time Buyer for the purposes of buying my new house, since I have never had a principal private residence in the state before? My only previous property was a pure investment.

It seems ridiculous that I would have to pay CGT on my first property and pay stamp duty on my first private residence, surely it would be one or the other but not both?

I realise that most people buy their first property as their residence, and subsequent property as an investment, so this is perhaps an unusual way to do things, but I would like to get clarification on the above before making any decision.


Thanks for your input.

 

[ClubMan]

My question concerns the tax implications of this, and the stamp duty implications of buying a house for myself.

Did you pay SD on the original purchase? If not then you are still liable for this under the SD clawback rules. See here:

Revenue acts on abuse of stamp duty relief

Have you been making rental income tax returns? If not then this also needs to be sorted ASAP.

Property Investment FAQ

I have made some money on the investment property, so I believe that I may be liable for Capital Gains Tax once I dispose of it.

Yes. Any capital gain (less the usual allowances/expenses etc.) on an investment property is assessable for CGT.

However, am I then regarded as a First Time Buyer for the purposes of buying my new house, since I have never had a principal private residence in the state before?

No - not for SD purposes. Yes for owner occupier mortgage interest relief purposes.

My only previous property was a pure investment.

This is irrelevant - you have lost your FTB status with regard to SD so.

It seems ridiculous that I would have to pay CGT on my first property and pay stamp duty on my first private residence, surely it would be one or the other but not both?

Not really - you are a landlord so property investment tax treatment applies.

I realise that most people buy their first property as their residence, and subsequent property as an investment, so this is perhaps an unusual way to do things, but I would like to get clarification on the above before making any decision.

Get independent, professional advice if you are unsure about anything in this area.

 

[Howitzer]

No - not for SD purposes. Yes for owner occupier mortgage interest relief purposes.

I'm not 100% on this but I think the 7 year clock on FTB mortgage interest relief starts ticking from the moment you buy your first property, regardless of whether it's your PPR or an investment. IF this is the case then you'll also find your mortgage interest relief is severely diminished.

 

[ClubMan]

My understanding is that once you buy a PPR you are entitled to FTB TRS. Having previously or subsequently bought an investment property should not affect this. If you claimed owner occupier FTB TRS for, say, 4 years, sold up and rented for a couple of years before buying another PPR then you would still have 3 years of your FTB TRS period left once you became an owner occupier again. I'm pretty sure that there's a Revenue summary somewhere on their website or posted here on AAM that confirms this. As ever - if in doubt get independent, professional advice.

 

[JulesDub]

Thanks for the feedback.

Re. SD on the initial purchase, the price was below 127,000 so there was no stamp duty payable.

Re. Tax returns for rental income, yes I have made these each year.


I suppose my main question would be why someone who buys an Investment property would lose their FTB status when they weren't treated as an FTB when buying it, since is was not their PPR.

 

[ClubMan]

I suppose my main question would be why someone who buys an Investment property would lose their FTB status when they weren't treated as an FTB when buying it, since is was not their PPR.

Who knows but them's the rules.

One might turn the question around and ask why shouldn't owner occupiers be able to get tax relief on 100% of mortgage interest like investors and not be restricted to standard rate tax relief on only a limited amount?