Reducing CGT by getting married

by Readers Question

12:46 PM, 11th April 2014
About 7 years ago

Reducing CGT by getting married

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Reducing CGT by getting married

Hi there, I have a B2L property that I bought 9 years ago for £250k and I’ve rented it out from day one. I have never lived there so I cant claim PPR or lettings relief. Reducing CGT by getting married

I’ve now got a buyer for the property at £325k so even after I deduct £10k buying and selling costs and my accountant has worked his magic with allowances I’m going to be looking at a pretty ugly CGT bill of around £8-10k (my calculations, waiting for the accountant to confirm exactly) which obviously I do not want!

Now currently I’m not married (been with girlfriend for 20 years with 2 kids).

It has been suggested that if I get a quickie marriage sorted and then transfer half the property to my new wife then we can use her annual CGT exemption allowance and it will reduce the CGT bill. However, the cash buyer for my property would like to complete in around 4 weeks which wouldn’t normally be a problem, thing is can I get married in 4 weeks?

But my real questions are:-

1.Will this work?

2.How easy is it to transfer the property into joint names?

3.My partner to be does not work and has the credit rating of a goldfish so will the lender agree?

4.If I show proof to the lender that the property is sold and I’m purely doing this for Tax reasons will they do it?

5.Is it worth the hassle?

6.Is there a better way of avoiding this bill, some secret little tactic maybe that other proffesionals use that me and my accountant are not privy to?

Obviously I do not want to go to prison so legal suggestions only please. I am not trying to scam the tax man, I am merely trying to reduce my CGT bill in any LEGAL way possible even if my ideas are a little cheeky )

Regards

Rob 🙂

Comments

Mark Alexander

12:52 PM, 11th April 2014
About 7 years ago

Hi Rob

Some would argue that getting married just to save tax is not a good reason to do so. Others will say that if you have been together for 20 years and have children together you should have done it ages ago. There will also be people who think you should just pay the tax. However, I'm not ggoing to judge you on any of those things. I'm simply going to answer your questions in the order asked.

1) Yes this will work

2) It is very easy, any good solicitor should be able to do it.

3) The lender doesn't need to get involved so your wifes credit score is not relevant. The transaction can be a back to back paper transaction on the day of completion of the sale.

4) See 3) above

5) Only you can make that decision. Depending on your tax rate it could save you a LOT of money.

6) I am not aware of a better way but I an open minded to suggestions from others.
.

Adrian Jones

13:15 PM, 11th April 2014
About 7 years ago

Reply to the comment left by "Mark Alexander" at "11/04/2014 - 12:52":

A couple of points. How much tax is going to be saved when costs (including honeymoon!) are taken in to account.

Not sure I agree with Mark's comment about the lender not being involved. Surely if another "owner" is added to Land Registry records the lender would have to be notified.

I'm sure Mortgage Express, for example, would be most helpful!

Good luck.

Lawrence Squid

13:27 PM, 11th April 2014
About 7 years ago

Would anyone like to get married?
I've just had a second hip replacement, so I'm good to go!

Steve From Leicester

13:28 PM, 11th April 2014
About 7 years ago

This isn't really an answer to the question, it's more of an anecdote . . .

If you get divorced, and you say to the judge:

"I know I gave her a half share of the property but I only did it to save tax"

it probably won't stop the judge from awarding 50% of the property's value to your soon-to-be ex.

I speak from experience 🙂

Mark Alexander

13:34 PM, 11th April 2014
About 7 years ago

Reply to the comment left by "Adrian Jones" at "11/04/2014 - 13:15":

Hi Adrian

I can assure you that the mortgage lender has no involvement.

The redemption figure is agreed with the l;ender, a completion date is set, the CGT exempt transfer between spouses is a mere paper exercise affecting beneficial ownership only which occurs second before completion and then the solicitor completes his undertaking to repay the mortgage. It's a very simple tried and tested tax planning process which is familiar to all good tax advisers and solicitors.

Members of my family have used this strategy on several occasions.

Much nicer to use the extra money to have a honeymoon instead of paying the tax man BTW but a honeymoon is not an essential part of the exercise 😉
.

Lawrence Squid

13:34 PM, 11th April 2014
About 7 years ago

Good point Steve.
I hereby withdraw my offer of marriage

Keith Cole

13:35 PM, 11th April 2014
About 7 years ago

Not worth the hassle, just pay up and carry on living in sin.

Mark Alexander

13:38 PM, 11th April 2014
About 7 years ago

Cost of the exercise is less than £100 by the way.

Also, if you have been living with somebody for 20 years and have kids together a separation would cost no more whether you are married or not so I think you can safely ignore those comments too Rob.
.

Rob

13:50 PM, 11th April 2014
About 7 years ago

Just awaiting the 2 figures from my accountant 1 tax bill if im married and 1 tax bill if im not, but its looking like it could be a good idea, as for getting married we would be getting married anyway at some point so maybe a quickie marriage to satify the tax side, then a big party and a honeymoon a couple of weeks later! Then again we may as well just fly off to vegas for the weekend on the tax man )

Keith Cole

13:54 PM, 11th April 2014
About 7 years ago

Everyone looking for a loophole to avoid paying there dues, no wonder the country is going down the pan

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