CGT and Stamp Duty when adding your Wife's name

Repromancer

Hi all,

I am really confused with the CGT and Stamp Duty rules when it comes to simply adding your wife's name to a mortgage, and would really appreciate the high level expertise that people on this forum have. :beer:

I am going to give exact figures so that it will be easier for you to advise me.

I bought my currently flat back in 2007 for £170K.
I rented the flat out for the first 3 years, and have been living in the flat since 2010.

Now, my wife an I are planning on buying another house whilst renting out the flat. I thought it would be nice to have her name on the flat as well.

We are looking to remortgage the flat with a different lender to a Let to Buy as it is currently Residential mortgage, and the lender has valued it at £285K. My current mortgage is £120K, and we are looking to borrow up to 75% LTV (£213,750). :j

For Stamp Duty purposes, I believe my wife is not liable to pay any stamp duty as her half of £213,750 is less than £125K. Is this correct?

I am totally aware that we will be paying 3% stamp duty on the purchase of the other house, but for the purposes of the remortgage I see no Stamp Duty charge. Correct?

As for CGT, there is £115K profit over 11 years, however it was my main residence for 8 years. I don't even know where to begin with calculating the CGT. Could you please advise? :money:

Many thanks!!

00ec25

CGT
Transferring an asset to a spouse to whom you are legally married (ie an old fashioned wife, not a "partner" :silenced: ) is totally free of CGT.
She will "acquire" her share at your historic cost, so 170k x whatever % you give her.

I am a little confused as to where is the current marital main residence? "You" have been living in the flat since 2010, does that mean the pair of you as a married couple?
If yes, she will indeed "inherit" "your" claim to PRR
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64950

do not forget that legal ownership is not what determines CGT, it is the beneficial ownership which matters. Therefore, as your intention is to split rental income between the pair of you it is vital that you do a Form 17 to document the respective beneficial ownership for both CGT purposes
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22020
and for income tax on the rent purposes
https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

Do all the above and when sold your and her CGT bill will be net of PRR and LR, see post #2 here for example of calculation: https://forums.moneysavingexpert.com/discussion/5764759/cgt-and-letting-relief

You can transfer to a spouse as many times as you want, so it would make sense to put all / the bulk in your name prior to sale. BUT do so hugely in advance of selling, otherwise such a transfer will be ignored by HMRC under settlements legislation as being done purely for tax avoidance between spouses.

00ec25

SDLT
please confirm the order of events:

current flat: will be transferred to the wife BEFORE the new marital main home is purchased? On that basis you are correct that the re-mortgage would not be subject to either higher or standard rate SDLT

new home: will be purchased AFTER the transfer? Higher rate applies as you have already identified since you are not replacing the main home.

Repromancer

00ec25 wrote: »

CGT
Transferring an asset to a spouse to whom you are legally married (ie an old fashioned wife, not a "partner" :silenced: ) is totally free of CGT.
She will "acquire" her share at your historic cost, so 170k x whatever % you give her.

I am a little confused as to where is the current marital main residence? "You" have been living in the flat since 2010, does that mean the pair of you as a married couple?
If yes, she will indeed "inherit" "your" claim to PRR
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64950

do not forget that legal ownership is not what determines CGT, it is the beneficial ownership which matters. Therefore, as your intention is to split rental income between the pair of you it is vital that you do a Form 17 to document the respective beneficial ownership for both CGT purposes
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22020
and for income tax on the rent purposes
https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

Do all the above and when sold your and her CGT bill will be net of PRR and LR, see post #2 here for example of calculation: https://forums.moneysavingexpert.com/discussion/5764759/cgt-and-letting-relief

You can transfer to a spouse as many times as you want, so it would make sense to put all / the bulk in your name prior to sale. BUT do so hugely in advance of selling, otherwise such a transfer will be ignored by HMRC under settlements legislation as being done purely for tax avoidance between spouses.

Hi,

Thank you for the in depth post!

My Solicitor has written to me to say that "the transfer of the property will be a 'disposal' for CGT purposes and may trigger the requirement for CGT to be paid". Is this incorrect then?

We married in 2015 and have been living together since. Does this change anything?

Our intention is to sell the flat in the future. With regards to those two forms, is your advise then to make the flat the main residence before selling, or transferring all to my wife before selling?

Sorry, tax is not my strongest point!

Repromancer

00ec25 wrote: »

SDLT
please confirm the order of events:

current flat: will be transferred to the wife BEFORE the new marital main home is purchased? On that basis you are correct that the re-mortgage would not be subject to either higher or standard rate SDLT

new home: will be purchased AFTER the transfer? Higher rate applies as you have already identified since you are not replacing the main home.

We were told even if we were to buy the new property without adding my wife's name to the flat, we will still pay the higher Stamp Duty even though my wife is a 1st time buyer, due to married couples been treated as one single entity.

So, you are correct, the flat will be remortgaged before and my wife's name added to the mortgage.

00ec25

Repromancer wrote: »

My Solicitor has written to me to say that "the transfer of the property will be a 'disposal' for CGT purposes and may trigger the requirement for CGT to be paid". Is this incorrect then?

I note the use of the weasel word may, but even so, if your solicitor put such a statement in writing then it is perhaps worth considering getting a different solicitor as they appear to be either a) slapdash in what they are willing to put in writing, or b) beyond incompetent

to be fair (?) to your solicitor I suppose "a little bit of knowledge is a dangerous thing", but I'd expect a professional solicitor to keep quiet in such a circumstance (ask them for details of their professional indemnity insurance asap if you continue to listen to their tax "advice"). Legal advice = solicitor = OK. Tax advice = accountant = OK. NOT vice versa.

https://www.legislation.gov.uk/ukpga/1992/12/section/58/enacted

Repromancer wrote: »

We married in 2015 and have been living together since. Does this change anything?

no it does not. She acquires at your historic cost and also gets to claim PRR for the period she was living there, including the period she was "co-habiting" with you pre marriage (naughty, naughty :A )

Repromancer wrote: »

Our intention is to sell the flat in the future. With regards to those two forms, is your advise then to make the flat the main residence before selling, or transferring all to my wife before selling?

you have NOT YET positively confirmed that the flat is the marital main home???

a married couple can only have one main residence between them, and it must be the same property for both of them

it appears the flat is already your main residence in your case, so your question is null.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64427

00ec25

Repromancer wrote: »

We were told even if we were to buy the new property without adding my wife's name to the flat, we will still pay the higher Stamp Duty even though my wife is a 1st time buyer, due to married couples been treated as one single entity.

So, you are correct, the flat will be remortgaged before and my wife's name added to the mortgage.

yes, if one out of 2 joint purchasers fails the test then both fail and the higher rate applies to the whole purchase

can't be bothered to find the exact para, but it is confirmed somewhere in here
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09730

Repromancer

00ec25 wrote: »

I note the use of the weasel word may, but even so, if your solicitor put such a statement in writing then it is perhaps worth considering getting a different solicitor as they appear to be either a) slapdash in what they are willing to put in writing, or b) beyond incompetent

to be fair (?) to your solicitor I suppose "a little bit of knowledge is a dangerous thing", but I'd expect a professional solicitor to keep quiet in such a circumstance (ask them for details of their professional indemnity insurance asap if you continue to listen to their tax "advice"). Legal advice = solicitor = OK. Tax advice = accountant = OK. NOT vice versa.

https://www.legislation.gov.uk/ukpga/1992/12/section/58/enacted

no it does not. She acquires at your historic cost and also gets to claim PRR for the period she was living there, including the period she was "co-habiting" with you pre marriage (naughty, naughty :A )

you have NOT YET positively confirmed that the flat is the marital main home???

a married couple can only have one main residence between them, and it must be the same property for both of them

it appears the flat is already your main residence in your case, so your question is null.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64427

Thank you again! To be fair to the solicitors, they did advise me to speak to my accountant or a tax advisor for further details in this respect lol but you're rite, a little bit of knowledge in this aspect was not a good thing.

With regards to marital main home, it has always been my main home, I have not owned any other properties. As for my wife, I don't know if there was a way for her to nominate her main home? She was living with her parents before, and tbh I think her address is still showing parents address on the electoral role, which we didnt realise to change

Repromancer

00ec25 wrote: »

CGT
You can transfer to a spouse as many times as you want, so it would make sense to put all / the bulk in your name prior to sale. BUT do so hugely in advance of selling, otherwise such a transfer will be ignored by HMRC under settlements legislation as being done purely for tax avoidance between spouses.

Can you let me know why this would be the case? I.e. should we have in place "tenancy in common" with 99% for me so that I will have majority of the PRR which i acquired since 2007, where as my wife only became a joint owner in 2018? In which case, the CGT bill will be lower?