Capital Gains Tax on transfer of property

Stellar_Star

Hi.

Just a quick question. I own my own home. As of yesterday it is worth £125,000. I paid £115,000 for it 5 years ago.

I don't plan on selling, but my partner of a few years has moved in and we are planning our future together. She has £20,000 to add to bring down the mortgage, which I currently have £97,750 remaining to pay. I plan to put in £3000 myself to bring the balance to just under 75k (giving us a better % rate on repayments).

We plan to do this by making an overpayment on our mortgage with RBS (they allow 30% overpayment when a fixed rate is ending - mine ends in May). Once this overpayment is complete, I can set up a new rate with RBS on the new remaining balance under 75k.

After we have done this, we plan to transfer the title of the home to both our names (about 55/45 share in my favor as I have more equity than she has money to give).

My question is, since I will be at that point just "giving" her a 45% share of the property when the transfer of title is physically put through (even though she has paid £20,000 already to the mortgage) do we have any tax implications to consider?

It's mainly as we want to get the mortgage sorted ASAP and the transfer can take some time and RBS's variable rate isn't the best.

Thanks.

CLAPTON

no, assuming you have always lived there throughout your period of ownership, there is no cgt on all or part disposal.

no stamp duty as it's below the threshold

no tax on your partner as gifts are free of tax in the UK

Stellar_Star

Does it matter that we aren't married? Looking at the .gov website it states gifts to wife, husband or civil partner are exempt. We aren't married so is this different?

quietriot

The gift would normally be taxable if you're not married, but because you've lived in the house since you bought it, Private Residence Relief will reduce it to zero.

Stellar_Star

So the fact my partner will be giving me (although she will get her share of the property shortly after) £20,000 towards the mortage, because I haven't lived anywhere else, she can just give me that 20,000?

CLAPTON

Stellar_Star wrote: »

Does it matter that we aren't married? Looking at the .gov website it states gifts to wife, husband or civil partner are exempt. We aren't married so is this different?

gifts are free of taxation in the UK, who ever you give them to and however much you give.

that is free of taxation, although should you die within 7 years there may be inheritance tax issues
otherwise NO tax on gifts in the UK.

Mojisola

Stellar_Star wrote: »

After we have done this, we plan to transfer the title of the home to both our names (about 55/45 share in my favor as I have more equity than she has money to give).

If she's going to be an owner, won't she also need to be on the mortgage?

Stellar_Star

Yes she will be, we plan to overpay the bank with her 20,000, secure a new rate, then after that ask the bank to initiate a transfer of title for which I would need a solicitor. I was worried about 20,000 being taxed at any point is all since we aren't married and she is gaining 45% share of the house.

wakeupalarm

Surely if she is getting 45% share of a property for £20,000, then it is not a gift but a purchase?

getmore4less

How have you worked out 45:55, don't look right for the equity involved.

Stellar_Star

I thought that it would be a "purchase too" ish, but if she gave me the £20,000 I just didn't want to get stung by tax on it as a gift, as we arent married and I'm sure I heard you're not allowed to gift more than £3000 in a year. At least me giving her some equity is covered as I can dispose of it as I wish.

It wont be exactly 45:55, it was a rough guess. We can't do the proper calculations until the day it happens, but it will be split fairly on the transfer of equity form.