Stamp Duty - Unmarried, No Mortgage, No Consideration gifted transfer of equity

Gycraig

Nearly every landlord I speak to is trying to sell up / get out of btl, I was genuinely looking at getting into btl last year, btl mortgage on my property has tripled since interest rates changed. 

If being a landlord means mortgaging a house again I simply wouldn’t do it atm tbh especially if you are leaving the area your rental would be in. 

What would have been a decent profit for me before the interest rate changes would now barely break even 

SDLT_Geek

RD88 said:

Hi Everyone,

I've done a few searches on this forum already and couldn't find the answer, so apologies if this is really frequently asked or there's a thread already. Also please feel free to move this post if it's in the wrong place.

My boyfriend and I have been together for 12+ years. We are engaged, but honestly haven't really ever got around to getting married, we're both just aren't keen on spending so much money and don't think think it will really change much. Neither of us are against the idea but similarly are quite happy to plod along as things are too.

We own a modest little house together (joint tenancy, not tenants in common, which was bought in 2015. We've had a 2 year fix followed by a 5 year fix which ends 31st December as mortgages rates have shot up so much we've decided to use our savings to redeem our now smallish mortgage in full at the end of the term.

We're looking at moving out the area, back close to family, houses aren't really selling especially quickly around here, it's like the brakes have gone on. But we are seeing that a lot of the houses around us are renting out especially quickly, two of our neighbours let signs went up last week (one being our next door neighbours who's house is the unextended duplicate of ours and has always been a rental since we moved in) and we were kind of shocked when we had a quick snoop online to see how much there're renting for, 3+ times what we used to pay in rent back in the day for similar before we bought.

We never thought about a rental before, although I've worked for private rental companies and currently work for a large housing association with MR subs so am familiar with the sector. I know many people who are still jumping on the BTL thing, but honestly I was always quite put off by the tax eating into yields, second home stamp duty too always seemed quite a put off. I've looked online at the stamp duty criteria and was a little surprised to find that once the mortgage is cleared, as we have no liability and provided we make no consideration payment for the transfer of equity, either one of us could gift their equity in the property to the other and there'd be no stamp duty to pay because we aren't married. Is this really the case or have I misunderstood something?

Given we'd probably be looking to buy a second home to actually live in, the plan would be to buy it in the name of whichever one of us no longer has an interest in our old house, would this actually work to avoid paying the 2nd home surcharge? I doubt a lender would allow us two names on the mortgage and only one on the property, but not sure this would actually matter than much for us. I earn about 60k and my boyfriend 76k no dependents and we are not really after anything too fancy, we probably wouldn't be looking to borrow more than 150-170k so could hopefully even just keep the mortgage application to one of us if needed.

Is my understanding of the second home surcharge correct. Is there be any additional things we should be considering? Like would there be any liability due if we were say to end up getting married at some point in the future. Assuming the offset of this initial SDLT saving here is that you don't get the double up of personal allowances like the property income allowance and CGT allowance (if the time comes to sell)

I can provide some input on the SDLT.  By way of example I will assume that OP takes full ownership of the present house (to rent out) and BF buys and become the sole owner of the new home, using a mortgage.
For the strategy concerning the 3% extra to work, it is not enough that the old property is in OP’s “name” and the new house is in BF’s “name”.  The properties must fully beneficially belong to OP only and BF only.
The strategy would fall down if OP is to contribute capital to BF’s purchase because:
(a) That would likely be seen as a payment by OP for BF’s share in the old house (so potentially liable to SDLT) and \ or
(b) The payment could give OP a share in the new house, so OP and BF would be joint buyers of the new house and so liable to the 3% extra SDLT on the whole price.

Keep_pedalling

If you do this please make sure you both make wills if you don’t already have them in place. The other consideration is IHT. If either of you have assets exceeding £325k then IHT will be an issue if one of you meets an untimely end if you are not married or in civil partnership.

RD88

Thank you for your responses everyone. They are very much appreciated. It sounds like it may not be worth it to pursue. As very likely I would contribute some savings from our joint accounts towards the new house purchase. We'll have to put it on the back burner for a while and hope the market turns around. That or just look at accepting the higher sdlt on the second purchase if it's the only way we can move.