Adding my Wife to the deeds of my BTL

PierremontQuaker03

My mortgage on my BTL (which was my and my Wife's first home together) is coming up for renewal. When we first bought the house in 2002 I did not put her on the deeds or mortgage application.
Now I want to add her to the new remortgage application for a couple of reasons 1) she can share the income 50/50 and we will pay less tax and 2) when I eventually leave this world it will mean she will get the house (I am yet to do a Will).
Just wanted to know the tax implications of this if we wanted to sell the house in the future. I bought the house for 64k in 2002 and now it is probably worth 125k. In theory if I sold it I would pay tax on the capital gain, but by adding my wife to the deeds does this mean that if we sold it we would pay tax on the whole 125k.
I am not looking to sell, in fact I am just going to a 5 year fixed interest only mortgage so I would only sell out of desperation (i.e. thru lack of work).
Thanks for any advice.

purdyoaten

PierremontQuaker03 wrote: »

My mortgage on my BTL (which was my and my Wife's first home together) is coming up for renewal. When we first bought the house in 2002 I did not put her on the deeds or mortgage application.
Now I want to add her to the new remortgage application for a couple of reasons 1) she can share the income 50/50 and we will pay less tax and 2) when I eventually leave this world it will mean she will get the house (I am yet to do a Will).
Just wanted to know the tax implications of this if we wanted to sell the house in the future. I bought the house for 64k in 2002 and now it is probably worth 125k. In theory if I sold it I would pay tax on the capital gain, but by adding my wife to the deeds does this mean that if we sold it we would pay tax on the whole 125k.
I am not looking to sell, in fact I am just going to a 5 year fixed interest only mortgage so I would only sell out of desperation (i.e. thru lack of work).
Thanks for any advice.

Transfers between spouses are at a 'No Gain/No Loss' - so no tax implications on the transfer. If you transferred the property into joint names the net effect would be that you each purchased a half share in the property in 2002 at a cost of £32k each. Obviously, upon sale each would pay CGT on their individual gain on half of the house (62500 less 32000) with two annual exemptions.

It would be strongly advisable to have a reasonable period of time between transfer and sale although I note that this is not your main reason for so doing.

jimmo

purdyoaten wrote: »

Transfers between spouses are at a 'No Gain/No Loss' - so no tax implications on the transfer. If you transferred the property into joint names the net effect would be that you each purchased a half share in the property in 2002 at a cost of £32k each.

Strictly speaking, that’s wrong and it could be important in this case.
If you gift a half share of the property to your wife today that is deemed to be a disposal at no gain and no loss.
In other words your wife is deemed to have bought her half share today at half your acquisition cost.
Where this becomes important is when you look at Private Residence Relief on the ultimate sale of the property.
For the husband it has been his main residence during his period of ownership and he therefore qualifies for Main Residence Relief plus Lettings Relief. Depending on the numbers and the date you moved out it is quite possible that the whole gain will be covered with no tax to pay.
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief
　
For the wife the property has not been her main residence during her period of ownership and she therefore qualifies for nothing in the way of Main Residence Relief and lettings relief.
There is a special rule which overcomes this if the transfer of ownership takes place whilst the couple are living there but that can’t apply to you as the property is now let.
http://www.hmrc.gov.uk/manuals/cgmanual/cg64950.htm
You therefore need to balance any Income Tax advantage for the letting income plus the additional annual exempt amount for CG against the loss of Main Residence Relief (and Lettings Relief).

purdyoaten

jimmo wrote: »

Strictly speaking, that’s wrong and it could be important in this case.
If you gift a half share of the property to your wife today that is deemed to be a disposal at no gain and no loss.
In other words your wife is deemed to have bought her half share today at half your acquisition cost.
Where this becomes important is when you look at Private Residence Relief on the ultimate sale of the property.
For the husband it has been his main residence during his period of ownership and he therefore qualifies for Main Residence Relief plus Lettings Relief. Depending on the numbers and the date you moved out it is quite possible that the whole gain will be covered with no tax to pay.
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief
　
For the wife the property has not been her main residence during her period of ownership and she therefore qualifies for nothing in the way of Main Residence Relief and lettings relief.
There is a special rule which overcomes this if the transfer of ownership takes place whilst the couple are living there but that can’t apply to you as the property is now let.
http://www.hmrc.gov.uk/manuals/cgmanual/cg64950.htm
You therefore need to balance any Income Tax advantage for the letting income plus the additional annual exempt amount for CG against the loss of Main Residence Relief (and Lettings Relief).

Yes - missed that it was formerly the matrimonial home. Good points.

densol_2

As I understand it - transfers of property after the initial purchase will always be tenants in common and not automatically become the surviving owners property so deed of trust is needed ( and will )