Gift a mortgage free property to my house wife

ileven1225

Update on 2020/04/01 - note the previous questions have all been answered.
My solicitor is now drafting the trust of deed for my wife and myself . I currently own 100% the property (mortgage free) right now and I will add my wife's name in to make it as a joint title. Of course there is no finance involved at all. My solicitor has explained to my that i can:

Property ownership: me 15%, wife 85%;
Property rental income: me 15%, wife 85%;
Property sale income: me 50%, wife 50%;
Property sale cost/expense: me 50%, wife 50%;

Is it something you are aware of which is legally OK? I think it currently OK but when i sell the property i don't want any hassles.
Thanks.

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v

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Update:
I understand all options now, apart from option 3. Thanks for everyone's help so far!
If someone can comment on option 3, it would be really helpful! I found the link below showing option 3 is allowed?
https://www.ts-p.co.uk/news/rental-income-should-the-husband-or-wife-receive-it

Sole legal owner
The legal title might be in the sole name of one of you. This is quite usual if the property is mortgaged, if one of you is a higher earner, or perhaps it was owned and occupied by one of you before you met. It is still possible to declare rental income as belonging to your partner, so as to make use of their personal allowance and marginal tax rates. The declaration of trust should be signed by both of you and will state that although the legal title is in one partner’s name, they hold the net equity in the property for the benefit of the other partner in whatever shares are agreed.

Thanks everyone in advance!





Old questions:
Dear all,
I wonder if i can seek some help from this forum.
I 100% own a property (mortgage free) and currently receive month rental income. The income makes my total income tax over 40% band. As my wife doesn't have a job and i wonder if i can gift the property to my wife and she can receive the monthly rental income at 100%. As she is basic tax payer and we don't have to pay higher tax that we could make some savings for our future baby.

There are 3 ways:
1. Completely transfer the property to my wife

• There is no capital gain or stamp duty involved. I discussed with my solicitor, she told me that i have to use two solicitors as one is on my behalf and the other is on my wife's behalf. This is treated as i sell the property to my wife with zero consideration. Is it correct that i have to pay for two independent solicitors?

2. Transfer the property 50% to my wife.

• We will both own the property 50% : 50% and then we could use a declaration of trust or deed of trust to ensure that my wife has rental income, so a 99% / 1% split. It looks like possible. If so, how many solicitors i need?

3. Still 100% own the property by myself but 99% rental income given to my wife.
The property is still owned by myself, but we will declare Deed of trust to split the rental as 1% : 99% so that my wife can receive 99% rental income. Is it possible? See reference link below
https://www.ts-p.co.uk/news/rental-income-should-the-husband-or-wife-receive-it

Question really is if the above are all possible and how many solicitors i need.
I really want to save tax as only i got a job and we need to save for future baby. Thanks everyone's reply in advance!

4. Additional question:
If we chose option 2 and the property will then have shared ownership between myself and my wife, will it affect the remortgage this property in the future? I have good credit score and reasonable salary. My wife's credit score is low and has no salary (may be some rental income). For the remortgage purpose, if we would like to remortgage the property to free some cash, would I rather keep the ownership to myself only to meet lender's criteria Or it doesn't make much difference between sole and shared ownership in this instance?

Thanks!

G_M

Very similar question:


https://forums.moneysavingexpert.com/discussion/6088003/title-deeds&highlight=joint+tenants+in+common

ileven1225

Thanks , it sounds option 1 and 2 are OK and option 3 is not allowed, is it correct?
If so, how many solicitors shall be used for each option?

Retired_Mortgage_Adviser

That's right, option 3 isn't permitted. Option 2 is also doable but it involves a couple of steps which aren't complicated.

The "two solicitors" aspect is related to the nature of the transaction, person A transferring equity to person B.

Both parties' interests need to be (seen to be) independently safeguarded, hence why there usually is one solicitor for the transferor and one for the transferee.

Transfer of equity is a standard process and you should be able to obtain a fair fixed fee so hopefully it shouldn't cost too much.

00ec25

before your (current) marriage did you ever live in the property as your then main/only home?

if yes then think carefully about making her 100% sole owner as that would mean you lose any right to claim partial CGT exemption for the time you lived there

if not, then you will need to make her a Tenant in Common, you cannot use a declaration of trust (and Form 17 to HMRC) where ownership is as Joint Tenants, as that automatically precludes ability to split, since joint tenants means each person owns 100% which cannot be split for tax purposes. If your solicitor does not say that, get a better solicitor.

as said, option 3 = impossible

ileven1225

Retired_Mortgage_Adviser wrote: »

That's right, option 3 isn't permitted. Option 2 is also doable but it involves a couple of steps which aren't complicated.
........

Transfer of equity is a standard process and you should be able to obtain a fair fixed fee so hopefully it shouldn't cost too much.

How much a fair fixed fee would be if two solicitors used? Thanks!

ileven1225

00ec25 wrote: »

before your (current) marriage did you ever live in the property as your then main/only home?

if yes then think carefully about making her 100% sole owner as that would mean you lose any right to claim partial CGT exemption for the time you lived there

if not, then you will need to make her a Tenant in Common, you cannot use a declaration of trust (and Form 17 to HMRC) where ownership is as Joint Tenants, as that automatically precludes ability to split, since joint tenants means each person owns 100% which cannot be split for tax purposes. If your solicitor does not say that, get a better solicitor.

as said, option 3 = impossible

Thanks. My wife did not live in the property before. I rented out the property in 2012, does it mean i can still claim CGT exemption?

If the ownership to be shared, as you said, i need to apply tenants in common so that i can split 1% and 99% rental income even though the ownership of the property is 50% 50%, is ti correct?

Thanks!

chanz4

if simple transfer of ownership with no mortgage file a tr1

00ec25

ileven1225 wrote: »

Thanks. My wife did not live in the property before. I rented out the property in 2012, does it mean i can still claim CGT exemption?

if you lived there yourself whilst an owner of it and you were not married to her at the time,ie, it was your sole/main/only residence then yes, you get CGT "exemption" of the time period your lived there. You will then be liable for the period you did not live there but remained owner.

read up about private residence relief because that is how your calculation will work, it is a % of ownership time x the gain over the entire ownership
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2019

Note ignore reference to letting relief as that is abolished from April 2020

ileven1225 wrote: »

If the ownership to be shared, as you said, i need to apply tenants in common so that i can split 1% and 99% rental income even though the ownership of the property is 50% 50%, is ti correct?

correct, although why you are so fixated about 50/50 is unclear?

there are only 3 things you can do with a property:
1. sell it and pocket the proceeds; and/or
2. let it out and get a rental income; or
3. live in it

3. is irrelevant in this discussion and for 1&2 it is the beneficial share that drives the split of the money, not who is the legal owner, You must be TiC to be able to split unequally, and if you are TiC you must have a declaration in place (if you don't, then the default for a married couple, as applied by HMRC, is always 50/50 and that is precisely the situation you want to avoid)

if you have a DoT in place then that dictates that both sales proceeds and rent must be split according to that share.

The only time a DoT would be trumped is in respect of a divorce (provided the marriage is not a "short" one), as then all assets are pooled and split according to the divorce settlement

ileven1225

Retired_Mortgage_Adviser wrote: »

That's right, option 3 isn't permitted. Option 2 is also doable but it involves a couple of steps which aren't complicated..

If we chose option 2 and the property will then have shared ownership between myself and my wife, will it affect the remortgage this property in the future? I have good credit score and reasonable salary. My wife's credit score is low and has no salary (may be some rental income). For the remortgage purpose, if we would like to remortgage the property to free some cash, would I rather keep the ownership to myself only to meet lender's criteria Or it doesn't make much difference between sole and shared ownership in this instance?

sevenhills

ileven1225 wrote: »

I 100% own a property (mortgage free) and currently receive month rental income. The income makes my total income tax over 40% band. As my wife doesn't have a job and i wonder if i can gift the property to my wife and she can receive the monthly rental income at 100%. As she is basic tax payer and we don't have to pay higher tax that we could make some savings for our future baby.

Married Couple’s Allowance could reduce your tax bill by between £345 and £891.50 a year.


https://www.gov.uk/married-couples-allowance