Remortgage (Tenants in Common) and associated tax implications....

Guillemot_Undecided

Hi everybody. 

I'm just looking for a bit of reassurance regarding my plans for remortgaging, especially re tax implications. Just wanted to make sure I'm thinking this through correctly. Here's the story:

• I currently have a mortgage in my name only and have 75% equity in the property.
• My partner lives with me (it's her main and only residence) and we wish to use her savings to pay off the remaining mortgage with her becoming a joint owner (75/25) in the property.

Firstly, I looked into her 'gifting' the outstanding mortgage amount to me (circa £115k) to clear my outstanding mortgage, but this introduced potential future inheritance tax liabilities, should the worst happen within the next seven years. For personal reasons, we discounted this idea.

My current thinking is thus:

• Remortgage with a tenants-in-common mortgage with associated declaration of trust, to include my partner on the mortgage/ownership/land registry (75/25 ownership).
• Once the remortgage is complete (with same lender, same rate, no ERC (already agreed)), pay off the remaining balance with my partner's capital.

Based on my current thinking above, three questions arise regarding potential tax implications (in bold below):

1. I presume there is no capital gains tax to pay when I remortgage and my partner ultimately becomes owner of 25% share in the property? This is her main and only residence, she has lived here for two years. I therefore believe we are entitled to full Private Residence Relief and have to inform HMRC within 30 days. Is my thinking correct?
2. In the process of remortgaging, my partner will become 25% owner in the property (£115k), so I presume this transaction will attract no SDLT?
3. Once the remortgage is complete, my partner will use her savings to pay off the outstanding tenants-in-common mortgage. Will this have any tax implications as it will be using my partner's savings only to clear a tenants-in-common mortgage?
   

Any advice on the three questions outlined above will be greatly appreciated!

Many thanks!

MWT

Any reason why you don't just sell 25% of the property to your partner and clear the mortgage with the proceeds of the sale?

getmore4less

What inheritance tax liabilities?

Most gifts are IHT neutral (the tax is the same as if they had not done a gift).


No need to overcomplicate.

It won't be a remortgage if she just buys 25% by paying off your mortgage and you change the legal ownership at the same time.