Transfer of Property to Sibling

hgd7

Hi all

Myself and my sister brought a property together to rent out. Its on a BTL mortgage. However I need to take myself off this mortgage and land title as I am buying another property to live in. I want to give the titles to my sister. The bank have advised this is fine and they will transfer the mortgage to her. After we will submit a TR1. Is there any Stamp duty to pay on this? Considering we both brought the place together and own half each. In the future she will transfer the property fully back to me but thats another topic. :money:

Victor_the_Gink

You may have a (possibly substantial) Capital Gains Tax bill, but would need figures to advise. Assuming you have never lived there, you will get none of the available reliefs, save for the standard Annual Exemption Allowance, which is now £11,300

hgd7

Hi - we brought the flat for £295k, the BTL mortgage is £232k so we are just paying interest only. The value of the flat has gone to £340k. Only reason to move into her name is so I don't get hit with the higher stamp duty on my new place.

Pixie5740

Then you may well find yourself with a Capital Gain Tax bill when you dispose of your share of the BTL. Below is a link to the mechanics of the CGT calculation.

CGT Calculation

Victor_the_Gink

So, 45k gain. Split (presumably) 50:50. Your share of gain = 22.5k. Less allowance = 11.2 taxable @ either 18 or 28% depending on your circumstances, so a CGT bill of anywhere between £2,016 and £3,136.


You may deduct 50% of your buying selling costs to offset against the gain (not the tax bill).

gingercordial

hgd7 wrote: »

In the future she will transfer the property fully back to me but thats another topic. :money:

I wouldn't go around stating that in public. You're asking HMRC to link the transactions...

xylophone

http://www.thisismoney.co.uk/money/experts/article-2891754/ASK-TONY-wife-rental-property-like-gift-eldest-daughter-don-t-ready-cash-pay-capital-gains-tax.html

You are gifting your share of a mortgaged property to your sister - some of the considerations discussed in the above may be relevant.

hgd7

Surely there is no CGT to pay if there is no sale? My sister is not intending to sell the property - its used for investments. Is that right?

00ec25

hgd7 wrote: »

Is there any Stamp duty to pay on this? Considering we both brought the place together and own half each.

your sister is acquiring a further share in a property which she already parts owns therefore is not liable for the higher rate SDLT

the total o/s mortgage is 232K and she is taking this over in full. As such the chargeable consideration for SDLT purposes is 50% of the o/s mortgage = 116k

the standard rate SDLT threshold is 125k, so no, she will not have to pay any SDLT

Pixie5740

hgd7 wrote: »

Hi all

Myself and my sister brought a property together to rent out. Its on a BTL mortgage. However I need to take myself off this mortgage and land title as I am buying another property to live in. I want to give the titles to my sister. The bank have advised this is fine and they will transfer the mortgage to her. After we will submit a TR1. Is there any Stamp duty to pay on this? Considering we both brought the place together and own half each. In the future she will transfer the property fully back to me but thats another topic. :money:

I know you think you are being smart and will avoid paying some tax but you're not smarter than HMRC. Furthermore, once you've taken CGT into account for both you and your sister with all this transferring you'll probably end up paying more tax than if you just took the higher rate of SDLT on the chin now.

00ec25

hgd7 wrote: »

Surely there is no CGT to pay if there is no sale? My sister is not intending to sell the property - its used for investments. Is that right?

no that is wrong

CGT is based on disposal not "sale". You no longer have an interest in the property, you have therefore disposed of it and have triggered CGT by so doing

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg12700

when your sister transfers it back to you (in full you say) she will make a disposal and she will be liable for CGT at that time. You will also then be acquiring an additional property in which you do not already own a share and so will trigger the higher rate SDLT, for which the threshold is only 40k.

you may want to have a re-think?