Stamp Duty Payable On Gifted Property

2ran

Hi all,

My mother owns a buy to let property worth £400k with about £190k outstanding on the mortgage. She would like to gift the property over to me. I currently own a flat with about 50% mortgage on it.

How much stamp duty if any I would have to pay when she gifts it too me. I've heard that if the outstanding mortgage is below £125k then there is no stamp duty to pay, and she has enough funds to lower the mortgage to below £125k.

Im just unsure about how the new stamp duty rules would fit in as I already own a property yet this wouldn't be a purchase and more a transfer and the rules dont clearly explain what happens in this situation.

Thanks in advance

getmore4less

You need to get a mortgage unless the other one is paid off before the gift.

in that case it is part buy part gift.

booksurr

you don't understand how it works. There are only 2 options:

option a)
mother pays off her own mortgage using her own money and then gifts the property to you. No SDLT payable by you as there is no chargeable consideration exchanged with mother, its simply a gift of a property from her to you

option b)
mother lacks the money to pay off her mortgage. She cannot give the property to you until the debt is cleared as the lender will not allow a mortgage to be "transferred". You therefore will need a mortgage in your own name so that you can pay mother sufficient money to enable her to clear her own mortgage. QED you are purchasing the property and the higher rate SDLT will apply if you pay her more than £40,000 since you are increasing the size of your property portfolio

read the guide https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/509184/GuidanceNote_Final.pdf

kinger101

Your mother should also be aware that if she gifts the property to you, CGT may be payable, and the calculation will be based on the open market value of the property. IHT may also be payable if she dies within seven years of the gift. HMRC would expect the recipient of the gift to pay the tax in this happens.

Personally, I'd recommend your mother takes proper tax planning advice.

AnotherJoe

2ran wrote: »

How much stamp duty if any I would have to pay when she gifts it too me. I've heard that if the outstanding mortgage is below £125k then there is no stamp duty to pay, and she has enough funds to lower the mortgage to below £125k.

You've misunderstood that badly. The £125k limit is regards the price of the property, nothing whatsoever to do with the mortage size.

As everyone else has pointed out, you and your mother need to go see a solicitor to make sure this is realistic and done in a tax efficient way. Assuming your mother owns another house that she lives in, then as said CGT is likely involved and IHT also could be an issue and potentially also something called "deprivation of assets" should this be being done to avoid your mothers house being sold to pay care home fees in future.

You should also see a mortgage broker to see if you could get a BTL mortgage on this house. Odds are you could as the LTV will be around 50% but you need to check otherwise ten rest of this scheme comes to naught. And there is no need for your mother to reduce the mortage below £125k unless you can't get that big a mortgage.

getmore4less

kinger101 wrote: »

Your mother should also be aware that if she gifts the property to you, CGT may be payable, and the calculation will be based on the open market value of the property. IHT may also be payable if she dies within seven years of the gift. HMRC would expect the recipient of the gift to pay the tax in this happens.

Personally, I'd recommend your mother takes proper tax planning advice.

IHT Liability on failed PETS remains with the estate in most circumstances.

As this is a very large gift then there could(is) be liability on the recipient.

kinger101

getmore4less wrote: »

IHT Liability on failed PETS remains with the estate in most circumstances.

As this is a very large gift then there could(is) be liability on the recipient.

Technically, HMRC can collect from both estate and recipient (s199 IHTA). It's useful if mention is made in the will of what the executor should do in the event of a failed PET. But nothing discharges the recipients responsibility, if for example, the estate was insolvent.

I don't see that the size of the gift is relevant.

AnotherJoe

booksurr wrote: »

completely wrong

SDLT thresholds refer to the value of chargeable consideration:
- actual cash changing hands
or
- non cash value eg: debt liability aka share of mortgage

SDLT is payable on the value of the consideration, we agree.

I hope you aren't saying that the means of paying for the consideration determines the SDLT rate? eg pay with a £126k mortgage and SDLT is due, pay with £126k cash and none is due ?

That is what I meant by the mortgage size is irrelevant. That is the size of the mortgage of the purchaser.

Now, if you mean, mother pays down her mortgage so the consideration is under £125k, then (apart from the SDLT being payable on the whole value, which i did miss) that could also apply by mother giving the difference to son directly rather than paying down the mortgage to below £125k first. IN either case, its not determined by the mortgage, apart from as a side effect.

Look in the SDLT rules and let me know where mortgage size is mentioned.

2ran

Reading what people have said. If she lowered the mortgage down to below £125k and then gifted it too me I would not be liable to pay any stamp duty as the mortgage would be below £125k as said here: https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#gift

You’re given property as a gift
If you get property as a gift you won’t pay SDLT as long as there’s no outstanding mortgage on it. But if you take over some or all of an existing mortgage, you’ll pay SDLT if the value of the mortgage is over the SDLT threshold.

melstar11

You'd still have to sort out the mortgage issue though.

kinger101

2ran wrote: »

Reading what people have said. If she lowered the mortgage down to below £125k and then gifted it too me I would not be liable to pay any stamp duty as the mortgage would be below £125k as said here: https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#gift

Your interpretation is incorrect. You already own one property so the rules for additional SDLT apply. So 3% in addition to what the normal rates are. The only exception would be where consideration is under £40,000.

You need to read post 3 again.