Transfering property to avoid landlord stamp duty?

mmcgeady

I had just considered my fiances income when assuming she should be able to get a BTL mortgage. We are going to see our financial advisor next week so hopefully we should know more then.

With regards to CGT, I purchased the property for 120k and it is now valued at 140k with 100k left on the mortgage still. I know I would be liable to pay CGT on the 20k profit I have made. How does the concessionary purchase work? Would my fiance get a BTL mortgage for the concessionary purchase of 100k to pay off my mortgage. Then the other 40k value of the property would essentially be the deposit?

Pixie5740

Yes, if she is can find a BTL mortgage lender who will accept a gifted deposit. Your mortgage broker will be able to advise.

Have you worked out how much CGT you'd need to pay on £20k?

kinger101

You can't transfer the property to your partner as you have a mortgage on it. You could sell it to her, which would trigger CGT and SDLT, as well as lots of fees from solicitors, banks and surveyors.

I doubt this makes any more sense than paying the extra 3% or just getting rid of the property to an unconnected person.

You don't really spell out what you want to do after the marriage, but while there's a mortgage on it, you'll pay SDLT if any ownership passes back to you. If HMRC start to think anything looks like tax avoidance, there is also something called general ant-abuse rules which means they might still decide you need to pay more SDLT.

mmcgeady

I would be happy enough to keep the flat in my partners name after the marriage and I would keep the house in mine. This would work out better in the long term as she is on a lower tax rate aswell.

My financial advisor normally handles all of my tax returns so I will be able to have them calculate the CGT for me.

booksurr

mmcgeady wrote: »

I would be happy enough to keep the flat in my partners name after the marriage and I would keep the house in mine. This would work out better in the long term as she is on a lower tax rate aswell

so that implies you are a higher rate tax payer and she is a basic rate taxpayer

I appreciate you have given only purchase and value excluding the original SDLT, legal and other costs incurred in the purchase and sale but as a ball park CGT you would face 20,000 gain - 11,100 personal; allowance = 8,900 @ 28% = £2,492

she will not have to pay SDLT if she buys the place from you for 100k (sdlt threshold being 125k of course) but she will incur legal fees at least

so how does all that stack up with avoiding the 3% SDLT ???

mmcgeady

The house we are looking to buy is above 300k so the 3% SDLT would cost us more.

kinger101

mmcgeady wrote: »

The house we are looking to buy is above 300k so the 3% SDLT would cost us more.

Sounds like you have the potential to mitigate a bit of tax then (both SDLT and IT). Personally, I'd still get professional advice on this though given the potentially amounts involved. And from an accountant or chartered taxation advisor rather than a solicitor.

I'd still do a bit more research on the likely costs first though. I thought fees on BTL mortgages were quite high.

Marvel1

I'm probably thinking wrong here, flat transferred to GF, worse case scenario you split up, you just give her a flat that is hers.