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Three Ways To Avoid 3% SDLT Surcharge On BTL Property Purchases



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in 2016 George Osborne came along and

introduced a three percent surcharge on

anyone buying investment or buy-to-let

property now in this video I'm going to

share with you three ways in which you

can completely avoid that 3 percent

surcharge on

buy-to-let an investment property but

first let me just tell you a little bit

about Who I am

my name is Ranjan Bhattacharya I've been

investing in property for about 28 years

now and I'm in these videos and how-to

tips and things I'll be sharing with you

some information which will hopefully

add some value and help you along the

way in your journey you can come and

meet me I host the Baker Street property

meter every month it's a monthly

networking meetings the largest one in

London we have a couple hundred people

every month typically meet on the last

Wednesday of every month all the dates

and everything and links are in the

description field down below but

muscular with the video three ways to

avoid the three percent surcharge on

buy-to-let and investment property now

as I mentioned before 2016 before George

Osborne imposed the charge if you were

to buy a investment property for 500,000

pounds you'd be shelling out fifteen

thousand pounds in stamp duty now I

think anything over naught is a bit too

much really in stamp duty god knows what

it's for it's an ancient tax I think it

was brought in hundreds of years ago to

fund some sort of war by some king or

whatever but that's irrelevant 2016 3

percent surcharge was imposed and that

meant that if you were to buy a five

hundred thousand pounds investment

property it went at the standard he'd

pay became thirty thousand pounds

instead of fifteen now what that meant

was that it's fine if you're doing

things up north and many people have

gone up north but if you're in London

the southeast and he wanted to do

buy-to-let or purchase an investment

property then quite frankly it made a

lot of deals unviable particularly in

front of the upfront cash you need to do

the deal because remember when you buy

an investment property

many people are relying on leverage

they're relying on bank finance now you

could borrow money to to purchase the

property but stamp duty is something

that you have to find cash for so not

only do you have to find deposit for the

loan on the property in the first place

you then have to find an extra back for

the stamp duty - and as I mentioned in

London and the South East many deals

just become viable so looking around at

the various SDLT rules because tax in

the UK is very very complicated

there are lots and lots of different

rules it's about understanding what

those rules are and seeing whether there

any opportunities to achieve your

objectives in life while conforming with

all the rules and really that's what

this video is about so way number one is

to explore something they call MDR or

multiple dwellings relief now what this

means is that if you are to buy multiple

dwellings in the same transaction then

the stamp duty is calculated in a

completely different way

so in my 500 thousand pound property

example if that property comprised of

four dwellings or four flats then the

way the stamp duty would be charged is

as though you are buying four flats each

one at hundred and twenty five thousand

pounds so the stamp duty on that

purchase would come down to twenty

thousand pound now to benefit from this

rule is important to understand what we

mean by a dwelling obviously we mean

something that's a flat or something

that's

self-contained it can also mean an HMO

property now as long as it's

self-contained so let's say you're

buying a house or a property or building

which comprises of four HMO rooms and

each one of those rooms is

self-contained ie has its little ensuite

has their mini kitchen and has somewhere

to sleep and all of that all behind one

front door to that little room that is a

dwelling and if you've got four of those

in one property it can be classed under

MDR or multiples dwellings relief in

terms of calculating stamp duty now with

stamp duty timing is very important it's

and and the time to kind of know is the

time at completion so when you complete

the purchase what is the state of the

property it doesn't matter what it is

five minutes before or five minutes

after quite frankly it's what it is at

the time of purchase and as long as you

have evidenced that the property is four

dwellings at the time of purchase this

can be through something like a severe

surveyors report a wick surveyors report

to say hey this is four dwellings here

then that should be enough to get your

stamp duty a stamp duty claim filed for

MDR and you do that for your solicitor

in the regular way it doesn't matter

actually whether it's full it's got four

separate counsel taxes or not the test

of MDR is a matter of fact so as long as

you've got pictorial evidence and as a

set of surveyors report of four separate

dwellings you will be able to claim that

relief the second way is to look at

commercial property or mixed use

property now if you were to buy a

commercial property valued at five

hundred thousand

then that stamp duty bill would come

down to fourteen and a half thousand

pounds now by commercial property we're

talking about

Sharp's we're talking about offices

warehouses and that kind of thing but it

also applies to mixed-use irrespective

of the proportion of the mix if you like

so let's consider a typical mixed use

property which would which would be a

shop and maybe a couple of flats above

now even though two-thirds of that fill

space is residential and one-third is

commercial that doesn't matter it is

mixed use and any mixed use property the

stamp duty is calculated as at the

commercial rate so if you are to go out

and buy this 500,000 pounds property and

it comprises of a shop with two flats

above then that entire transaction will

be stunted at the commercial rate which

is fourteen and a half thousand pounds

not a bad little one that now the third

way is quite exciting it's gone to court

and a couple try to basically buy a

house a bungalow and it was

uninhabitable it had some asbestos in

and stuff like that and it couldn't be

habited at the time of completion now

buried in all the tax rules and all of

that there appears to be an exemption

for uninhabitable property now the HMRC

took the taxpayers to court and they

lost the tribunal found in the taxpayers

favor which is always a nice thing so

this opens up an interesting little

loophole if you like and I and their

links in the description to some

articles relating to this case that I'm

referring to but the headline is

basically this you buy a property and

it's uninhabitable they're uninhabitable

usually means no kitchen no heating that

kind of thing

and it obviously can be no roof and more

fundamental things like that but if you

buy a property and it's uninhabitable

and you

have that evidence so that can be

pictorially that can be typically a

Rick's of airs report which says it's

uninhabitable is the best thing then

basically you can get that surcharge

exempted if you like and your stamp duty

on that property would be fifteen

thousand pound now that actually changes

the game a little bit because a lot of

the sort of fix up and flip type

opportunities that used to exist in the

southeast were really a little bit

unmade unviable by George Osborne's SDLT

ruling and if it's uninhabitable this

court case brings it back into play

because the stamp duty becomes far more

reasonable reasonable so yes George

Osborne

pulled a blinder if you like by

introducing this new tax in 2016 and

that's made a lot of people got north

fishing for opportunities up there

purely because the Stamp Duty is lower

but if you know what you're doing and if

you target specific types of properties

then you can invest in London and the

South East of England and the SDLT won't

be that bad if you buy the right types

of property so that's it for this video

please leave your comment down below

subscribe I'll be making a lot more of

these videos tell me what you want to

hear leave a comment and also come and

see us kind of see us at the Baker

Street property meet we meet pretty much

at the last Wednesday of every month the

details at Baker Street property meet

calm and details are in this description

here that's it for now see you soon and

keep investing