Going from one owner to joint.

ANGLICANPAT

Person living in 600k flat bought outright in their own name , is joined by a partner . That was ten years ago.
Ownership of the flat remained in the one name. Now they plan to sell , and buy a different property to better accommodate their children.

They wish to own it with both names on the paperwork. Being unmarried, I presume this means that the 'owner' partner would effectively be 'giving ' the other, a £300k gift - and will therefore have to survive 7years , before it would clear from the 'owner' partners capital for inheritance tax purposes ?

I can see that if they got married before buying the new place, it would eradicate the problem (I think), but what would the position be if there wasnt time, and they married after the purchase ? Would the marriage wipe out the need for the original 'owner' partner to live 7 years or would that remain despite the fact they would be married if the 'owner' partner diedwithin the seven years? Grateful for any thoughts on this. Thanks.

CLAPTON

ANGLICANPAT wrote: »

Person living in 600k flat bought outright in their own name , is joined by a partner . That was ten years ago.
Ownership of the flat remained in the one name. Now they plan to sell , and buy a different property to better accommodate their children.

They wish to own it with both names on the paperwork. Being unmarried, I presume this means that the 'owner' partner would effectively be 'giving ' the other, a £300k gift - and will therefore have to survive 7years , before it would clear from the 'owner' partners capital for inheritance tax purposes ?

I can see that if they got married before buying the new place, it would eradicate the problem (I think), but what would the position be if there wasnt time, and they married after the purchase ? Would the marriage wipe out the need for the original 'owner' partner to live 7 years or would that remain despite the fact they would be married if the 'owner' partner diedwithin the seven years? Grateful for any thoughts on this. Thanks.

The IHT allowance is 325,000 so if your OH gave you 300k but died within 7 years there would be no IHT as such but the IHT would count towards the estate's allowance ;
however if you were by then married and they left you everything then there would be no tax.
The 300k would count when you died (as second death) as your estate wouldn't benefit from the transferrable spouse allowance to the full extend

kidmugsy

This is one for a lawyer with the relevant expertise.

ANGLICANPAT

Thanks both of you.

Keep_pedalling

Buy the new place in one name, then get married, then do the transfer.

But before they do any of that make sure they have wills in place.

Casa1862

Keep_pedalling wrote: »

Buy the new place in one name, then get married, then do the transfer.

But before they do any of that make sure they have wills in place.

Not that straight forward, additional sdlt of 3% will apply on half of any mortgage taken out or existing.

Keep_pedalling

Casa1862 wrote: »

Not that straight forward, additional sdlt of 3% will apply on half of any mortgage taken out or existing.

They are selling the existing property, why would they need to pay the extra 3%?

Casa1862

Yes, sorry, not the additional 3% but if a mortgage exists then the transfer to joint names will attract sdlt if over the threshold on half the mortgage at the standard rate.

I'm going through it now, I own a second property and wanted to add my wife to our residential house, even though she doesn't own any property in her name we'll still have pay half stamp duty at higher rate on her share. Seems unfair as we've already paid stamp duty.

Keep_pedalling

Casa1862 wrote: »

Yes, sorry, not the additional 3% but if a mortgage exists then the transfer to joint names will attract sdlt if over the threshold on half the mortgage at the standard rate.

I'm going through it now, I own a second property and wanted to add my wife to our residential house, even though she doesn't own any property in her name we'll still have pay half stamp duty at higher rate on her share. Seems unfair as we've already paid stamp duty.

I was not aware of that, although in this case the existing place is owned outright, and even if he bought a new place for £1M with. £400k mortgage, SD on a 50% transfer would only be £1500.

A quick RO marrage would avoid all that hassle though

ANGLICANPAT

Casa1862 wrote: »

Yes, sorry, not the additional 3% but if a mortgage exists then the transfer to joint names will attract sdlt if over the threshold on half the mortgage at the standard rate.

It seems likely, the new purchase in the case from my original post, (probably with added mortgage) will now be made once again in the original 'owner' partners name as it seems the easiest option , I dont understand why when the partners married, (lets for the sake of interest say it was just a week later) the new half owner would be expected to pay further SD , as surely the full amount was paid on purchase the week before -- even if there was a mortgage involved . It would seem inexplicably unfair.

Maybe your case is to do with there being two properties involved?

booksurr

ANGLICANPAT wrote: »

the new half owner would be expected to pay further SD , as surely the full amount was paid on purchase the week before -- even if there was a mortgage involved . It would seem inexplicably unfair.

fair or not the fact remains that SDLT is a tax on financial transactions involving property. Therefore when a new person joins another on an existing mortgage the existing person's liability is now shared so they have made a financial gain in that their exposure to the full value of mortgage is reduced, hence a tax point.

I agree it does seem unfair when no actual cash charges hands but if it were not so it would be easy to manipulate the system to get respective shares below taxable thresholds