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Gifting property share, avoiding tax...a few questions
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Janet Humphries
Posted: 03 February 2016 16:41:36(UTC)
#1

Joined: 03/02/2016(UTC)
Posts: 1
Hello all,

I wonder if anyone is able to give me some advice my husband owns and rents out a house which he has a mortgage on. He is a higher rate tax payer and everything is declared to HMRC, however, he only sees a very small profit after paying all taxes etc. I will retire from the City to bring up our children and by December this year will not be on an income.

As I have some cash making very little interest in the bank he has suggested transferring the house into my name and for me to start doing self-assessments as I will pay very little tax on it as I will have no other income. He does not want the money I will make in rent it will go to cover our current homes bills and money for the children. However, as it is mortgaged would I effectively need to buy the house from him first?, in order to pay off the mortgage and have the property all in my name.

No problem with this but as he is effectively gifting his £125k share of it on the original purchase price and I need to put £108k to pay off the mortgage would I also avoid stamp duty rates as it would be under £125k?, or would I need to pay stamp duty at the houses current market rate?

Any pro's con's I've not thought about? Very worst case if he was to leave me in the morning then he'd still get a 50% share of it given we are a married couple but given he put up the bulk of the money in the start then I will not worry about this and the property has gone up in value since its original purchase 5 years ago.

Any advice would be much appreciated.

Thank you for taking the time to read this.
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jeffian
Posted: 09 February 2016 16:47:11(UTC)
#2

Joined: 09/03/2011(UTC)
Posts: 954
Janet,

I often warn against coming on here looking for advice from anonymous 'armchair experts' on matters which involve significant sums and really require professional advice, but as no-one has responded to you, I'll commit the crime myself! Here are a couple of articles (though dated) which may cover your situation -
https://www.taxinsider.c...roperty_to_Spouses.html
https://www.taxinsider.c...Gifting_a_Property.html

I feel sure enough of my ground to say that gifts between spouses do not incur CGT (the beneficiary simply inheriting the donor's cost). It SEEMS from these articles that no SDLT would be payable IF the property gifted is mortgage-free, but that SDLT would be levied if it was mortgaged. If that is so, the answer would seem to be for your husband to pay off the mortgage before making the gift to you.

Hope this points you in the right direction for further investigation, but please do not take my word for it and go to a solicitor for advice if you intend to proceed as you propose.
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Redundant (Old Timer?)
Posted: 10 February 2016 11:33:35(UTC)
#3

Joined: 07/01/2010(UTC)
Posts: 213
Janet,

I agree with Jeffian, you need to consult a solicitor or tax accountant on this. You will need a solicitor for any conveyance, but they may not be knowledgeable enough on the tax aspects of this transaction.

Jeffian said "It SEEMS from these articles that no SDLT would be payable IF the property gifted is mortgage-free, but that SDLT would be levied if it was mortgaged. " I would make a couple of observations:

a) Should SDLT be levied it could well be on the OPEN MARKET VALUE and not the gift price.
b) From 6 April 2016 if you have any part of the ownership of your family home then the new extra rate of SDLT for a second property will apply.

I would suggest you look on HMRC's website and in particular their manuals to see what the SDLT position will be.

I do have one further thought, if you do not need the rental income, your husband might want to think about gifting the property into a trust for the children (or possibly you and the children) provided any mortgage issue can be resolved. There are 10 year tax charges on trusts to consider, but it may be a solution. Trusts are very complex and you do need to consult a tax expert on this.

As always, my comments above are just my opinion and not advice.

Good luck
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James Burn
Posted: 10 February 2016 20:25:52(UTC)
#4

Joined: 13/03/2010(UTC)
Posts: 51
https://www.gov.uk/guida...hip-of-land-or-property makes it clear that because the £108k is less than £125k there is no SDLT to pay. You will need a solicitor/conveyancer for the transaction anyway, and they wil know the rules.

You could also consider his gifting less than 100% of the property to you, which would allow you (with the mortgage company's permission) to transfer the mortgage from one name to joint names. The proportion you agree to divide out the rental income can be a different proportion than the ownership of the property, as long as this agreement is in writing.

if your husband has lived in the property, you should also consider the CGT implications.
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Rich58
Posted: 10 February 2016 21:11:31(UTC)
#5

Joined: 10/02/2016(UTC)
Posts: 1
Hello Janet,
I have just done exactly this although I did not 'sell' my part of the house to my wife - just transferred the ownership from sole to joint names with a 'Transfer of Equity'. This was drawn up by the conveyancing solicitor at the same time as we remortgaged the house into joint names for a fee of £234. I chose a mortgage offer that included all conveyancing fees for the remortgage etc. so did not pay for that as a separate fee. There was no stamp duty to pay as the existing mortgage was below £125k and my wife took a percentage of that which was obviously below the £125k threshold for SDLT.
For us it was a simple and painless process and I am now released of the rental income to go against my taxable income.
Hope this helps,
Rich.
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Khayyam
Posted: 11 February 2016 11:48:48(UTC)
#6

Joined: 19/09/2013(UTC)
Posts: 2
Property in a trust is a lot of hassle. Apart from the costs of letting out the property, the tax on any profit is dreadful. Tax in the hands of a beneficiary carries a voucher but reclaiming the money is further hassle. I should have listened to my solicitor who told me to put a lump sum of money into the trust and put it in a low income-producing investment.

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