Transfer of ownership

Swri198

Hi
I have owned a house in equal joint ownership with my brother for some years. I lived there for a years but haven’t done so for the last 4. I would like to remove my name from the mortgage. The house was bought for £215k, now worth £250k with £100k outstanding.
My question is if I transfer ownership and he takes out a new mortgage to cover the whole amount, Is either of us liable for SDLT or CGT.
I will not be be taking any equity from the house in any form.

Thanks

Puflet1

You’d only be liable for CGT if you were disposing of a property which had been rented out, or part of which had been used solely for business purposes - and even then, you’d have to be making money before you could be taxed on it. SDLT is payable when buying a new property, not when extending a mortgage on an existing one.

So you should both be ok!

SDLT_Geek

Your brother will be liable to SDLT on his acquisition of your half share if he has another property and has not lived in this one throughout the last 3 years.

G_M

Puflet1 wrote: »

You’d only be liable for CGT if you were disposing of a property which [STRIKE]had been rented out, or part of which had been used solely for business purposes[/STRIKE]had not been your main residence. - and even then, you’d have to [STRIKE]be making money [/STRIKE]have made a capital gain before you could be taxed on it.

The house was bought for £215k, now worth £250k

So a total capital gain of £35K = £17.5K each. Your annual allowance = £12K so potentially £5.5K is taxable.

However the period of time when it was your main residence Vs when it was not is also relevant.


https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64200c

Swri198

SDLT_Geek wrote: »

Your brother will be liable to SDLT on his acquisition of your half share if he has another property and has not lived in this one throughout the last 3 years.

He has lived here throughout so that means no SDLT based on your comment, I guess

SmashedAvacado

Your capital gain would be further eroded by any capital expenditure on the property (ie things more than maintenance) and also your costs of buying (including SDLT and legal fees and surveying fees) and selling (ie legal fees)

Swri198

It’s quite confusing even after reading HMRC guidelines that if it is a straight transfer ownership, is it classed as a gift my case? If so, no CGT at all since there is no profit being made. That’s what I had originally thought. Sounds like my brother would not have to pay SDLT because it’s his main residence neither of us pays CGT because there’s no sale?

00ec25

Swri198 wrote: »

It’s quite confusing even after reading HMRC guidelines that if it is a straight transfer ownership, is it classed as a gift my case? If so, no CGT at all since there is no profit being made. That’s what I had originally thought. Sounds like my brother would not have to pay SDLT because it’s his main residence neither of us pays CGT because there’s no sale?

yes it is a gift but that does not exempt it from CGT. Indeed the law is written precisely to prevent tax free gifts of assets being made for obvious reasons

you are in tax law the part owner of a property you do not live in

you are "disposing" https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg10240 of that ownership to a "connected person" (ie your relation) https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14580

CGT is liable on the disposal of an asset to a connected person based on the change in value between what you originally paid to buy your share and what your share is worth at date of disposal using full market value. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14530

The law is written to ensure assets cannot be passed around (up/down or sideways) a family without incurring tax

That said, on the values you state, the maths means you won't pay any CGT, but you do have to do the calculation because you are liable for tax and so must have checked that you do not owe any tax. ("Liable" and "owe" are 2 different words with different meanings)

you have a 50% share of a 250k property, so 125k is your share
you state it cost 215k to buy so (we assume equal contribution to cost?) 107.5 is your share

125 - 107.5 = 17,500
that is above the CGT allowance of 12,000 so you must now calculate whether you owe anything. For that, as you state you did live there and we will assume it was your main home at that time, you can claim private residence relief for the period you lived there plus the final 18 months of your ownership

I lived there for a years but haven’t done so for the last 4.

this is key but also is poorly worded and unclear how long you actually mean

see steps: 1,2 & 4 (step 3 does not apply in your case, and step 5 will be irrelevant as i doubt you will have a net taxable gain)

link: how to work out CGT relief

Swri198

Thanks for the helpful info everyone

Mutton_Geoff

Swri198 wrote: »

I would like to remove my name from the mortgage

A lot of people use that phrase on this forum without realising there is no such ability. The original mortgage (in joint names) has to be redeemed and a new loan taken out by your brother to redeem the old loan. This will be subject to him earning enough and meeting other pressure testing the lenders do.


Even though his employment/income situation may be the same since the original mortgage was taken out, lending criteria may have changed so it may be worth him speaking to a broker before plans are firmed up.