Transfer part of ownership of BTL flat to spouse without having to pay SDLT?

Transfer part of ownership of BTL flat to spouse without having to pay SDLT?

11:16 AM, 27th May 2022, About 3 months ago 16

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I am going to sell a BTL flat with is under my sole name. For tax efficiency, I would like to transfer part of ownership to my husband (I am a high rate taxpayer) before selling.

The Mortgage provider has no issue to add his name. My questions are:

1) if I pay down the mortgage to 80k eg chargeable consideration of 50% of ownership becomes 40k, then there is no SDLT to pay for 50% transfer, right? or alternatively

2) I keep the mortgage at the current level (120k) but transfer less percentage ownership say 1/3 to my husband to stay below 40k, there is also no SDLT to pay.

Do I understand it correctly?

Many thanks.

Lisa



Comments

mark smith View Profile

11:25 AM, 27th May 2022, About 3 months ago

Lisa can transfer up to £125,000 chargeable consideration (deemed assumption of the loan proportion by her husband) to her spouse with no SDLT, but an SDLT return will need to be filed. The 3% uplift does not apply between spouses and civil partners.
Under £40,000 no return is needed.
There is no CGT on transfers between spouses and civil partners either.

Mark Alexander - Founder of Property118 View Profile

11:28 AM, 27th May 2022, About 3 months ago

The 3% additional rate of SDLT does not apply to transfers between spouses, so the consideration can be up to £125,000 in your circumstances as opposed the the £40,000 limit you seem to think it is.

Adrian Alderton View Profile

12:11 PM, 27th May 2022, About 3 months ago

I was looking to do precisely the same thing but to my long term partner (not married). She jtly owns other BTLs with me. I intended to transfer a small % below the £40k SDLT threshold.
My solicitor then tells me that the consideration by Hmrc is half the mortgage value and half the remaining equity. I am trying to explain that based on this method if say 10% is transferred and the total consideration is then below 40k then surely there is no additional SDLT.
Have I got this right as it appears to be falling on stoney ground with my solicitor.

Mark Alexander - Founder of Property118 View Profile

12:25 PM, 27th May 2022, About 3 months ago

Reply to the comment left by Adrian Alderton at 27/05/2022 - 12:11
I think you are right based on what you have said here.

Have you and your partner considered the merits of formalising your business Partnership? Depending on the amount of time you commit to your property business you may already be a Partnership by de-facto - see Partnership Act 1890. If this is the case you may also be in a strong position to consider the many benefits of incorporation. I strongly recommend you book a tax planning consultation with one of our Property118 Tax Consultants.

Adrian Alderton View Profile

14:04 PM, 27th May 2022, About 3 months ago

Thanks for the feedback.
As you say we would be de facto partnership. Looked at this but didn’t proceed as accountant indicated an extra 9% tax. Think this was NI class 4 from memory. At the time we were just self paying class 2.
Also our strategy from the start has been income generation. We set up a company when s24 came in but latterly realised
- it was a lot more expensive to run properties in a company
- companies are not good if you need income
Not a great move but at least we are making a profit now and can hold reserves or put into pension. So am not looking to incorporate and would reverse that decision with hindsight.
Regards

Mark Alexander - Founder of Property118 View Profile

14:54 PM, 27th May 2022, About 3 months ago

Reply to the comment left by Adrian Alderton at 27/05/2022 - 14:04
Interesting perceptions.

First, your Accountant is wrong about National Insurance. Class 4 only applies to trading businesses. If you are a Partnership by de-facto you would be a property INVESTMENT business, NOT a trading business. If you are a trading business then Class 4 NIC would apply whether you are a Partnership or not.

I am equally certain that your perceptions of Limited Company taxation are misinformed and as a result of this you will pay significantly more tax than is necessary if you continue as you are.

Adrian Alderton View Profile

15:10 PM, 27th May 2022, About 3 months ago

Yes I was aware of investment and trading business differences and we are definitely investment. Thanks for the information.
I think I will take you up on the planning consultation.
I just have to clarify some medium to long term goals with my partner as we seem to have some diverging views now.
So when I’m back from my motorbiking hols in N Spain I’ll get in touch.
Adrian

Mark Alexander - Founder of Property118 View Profile

15:13 PM, 27th May 2022, About 3 months ago

Reply to the comment left by Adrian Alderton at 27/05/2022 - 15:10
I am certain our team will be able to assist.

We are currently booking around two weeks in advance.

Also note that we offer a GUARANTEE of total satisfaction or a full refund and we actively encourage our Clients to involve their Accountants in the consultation process.

Lisa Madle

15:28 PM, 27th May 2022, About 3 months ago

Reply to the comment left by Mark Alexander at 27/05/2022 - 11:28
Hi, Mark,
I have been talking to a property solicitor today. She said as we already joint own our main home and my husband does not own a 2nd home, if I transfer my BTL to him even below 40k mortgage level he still have to pay SDLT on it as this is him to purchase a 2nd home. I am really confused now. So question becomes that if I clear the mortage then transfer him 50% at zero price, do we still have to pay SDLT taking into consideration that we joint own our main home outright? Many thanks.

Mark Alexander - Founder of Property118 View Profile

17:22 PM, 27th May 2022, About 3 months ago

Reply to the comment left by Lisa Madle at 27/05/2022 - 15:28
Your solicitor is wrong.

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