Sole to joint to spread tax and Stamp Duty liability?

by Readers Question

3 months ago

Sole to joint to spread tax and Stamp Duty liability?

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Sole to joint to spread tax and Stamp Duty liability?

I have two buy two lets on my sole name, 1x HMO and 1x single let.

With the new tax changes to the property market I am looking add my wife’s name on to both properties to joint tenants to benefit from her tax allowance. I am 40% tax payer and she has no income at all.

Both properties are mortgaged as HMO £145.000 mortgage (property value £250.000) and single let £160.000 Mortgage (property value £230.000)

The question is:

Would my wife be liable of paying stamp duty on each property??

My understanding was no but mortgage advisory told me different

Many thanks in advance

Ridvan

Comments

Neil Patterson

3 months ago

Hi Ridvan,

You could consider Declarations of trust where you can decide on the percentage of beneficial ownership you are transferring rather than moving the legal title.

However, in both cases there is no CGT on transfers between spouses, but there is SDLT if the property is mortgaged, because you are deemed to be giving consideration for that mortgage. Therefore as a ratio of the percentage of the property value to the amount of mortgage you can't transfer more than £40,000 worth of mortgage without triggering a Stamp Duty Liability.

Eg if the property is worth 200k and the mortgage is 100K you can't transfer more than 40%.

Please see our tax planning page as if would recommend a tax consultation first and then consider Declarations of Trust if appropriate. >> https://www.property118.com/tax/

Mark Alexander

3 months ago

Hi Ridvan

I agree with everything Neil has said above, but there is a way that you can share the income optimally between you without incurring the SDLT. it does involve the use of Declarations of trust but also requires you to form a partnership.

I will be able to explain more specifically in regards to your personal circumstances once you book a consultation.


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