Gifting part of buy to let mortgaged house to spouse

roadweary

Hi,

I'm just about to re-mortgage adding my wife to the mortgage of a buy to let property.  We jointly own the house we live in.  To be transparent the idea was to reduce the tax burden as she is in the lower tax bracket.

I've had the house since around 2007.  Purchased for about £195,000 probably worth about £350,000 now.  Re-mortgage will be for roughly £90,000.

I've used an online calculators and thought there was no stamp duty to pay.  

But now I've realised I made a mistake (I thought it was asking if she every owned a share in the buy to let property, but it was asking if she had ever owned a share in any property) and I think there is stamp duty to pay....namely £2,562.

Once I've paid this.....how much of the property can I allocate to her for future tax purposes?

If I decided I didn't want this tax burden (just found out the house needs a complete re-wire) but I want to maintain my mortgage offer.....can I proceed without changing the ownership and therefore incurring the tax?

My legal questionnaire has these options.  Which would I select to keep her name on the mortgage but not incur the stamp duty?



Thanks,
R

kingstreet

BTL mortgages usually require the ownership and borrowers to match so you wouldn't have the option of her being a borrower and not an owner. Check with the lender.

The 'joint borrower, sole proprietor' option is normally only available on residential purchases and can't be used by spouses to avoid SDLT.

As you complete the transfer of equity to joint, AIUI, you can elect for her to have 99% of the ownership and hence the rental income. 

roadweary

Thanks.  How does the 99% ownership part happen?  Do I just have the conveyancing solicitor do the change to joint (I assume the option selected in the screen shot from my original post and then do something myself after with the land registry....or does the solicitor have to do the whole thing?

SDLT_Geek

roadweary said:

Hi,

I'm just about to re-mortgage adding my wife to the mortgage of a buy to let property.  We jointly own the house we live in.  To be transparent the idea was to reduce the tax burden as she is in the lower tax bracket.

I've had the house since around 2007.  Purchased for about £195,000 probably worth about £350,000 now.  Re-mortgage will be for roughly £90,000.

I've used an online calculators and thought there was no stamp duty to pay.  

But now I've realised I made a mistake (I thought it was asking if she every owned a share in the buy to let property, but it was asking if she had ever owned a share in any property) and I think there is stamp duty to pay....namely £2,562.

Once I've paid this.....how much of the property can I allocate to her for future tax purposes?

If I decided I didn't want this tax burden (just found out the house needs a complete re-wire) but I want to maintain my mortgage offer.....can I proceed without changing the ownership and therefore incurring the tax?

My legal questionnaire has these options.  Which would I select to keep her name on the mortgage but not incur the stamp duty?



Thanks,
R

I suggest you check the stamp duty position.  Is the property in England, so the relevant tax is stamp duty land tax?

How did you get to £2,562 as the stamp duty?  There is an SDLT rule that the extra 3% does not apply to transactions between spouses who are living together.  That might help in your case.

roadweary

SDLT_Geek said:

roadweary said:

Hi,

I'm just about to re-mortgage adding my wife to the mortgage of a buy to let property.  We jointly own the house we live in.  To be transparent the idea was to reduce the tax burden as she is in the lower tax bracket.

I've had the house since around 2007.  Purchased for about £195,000 probably worth about £350,000 now.  Re-mortgage will be for roughly £90,000.

I've used an online calculators and thought there was no stamp duty to pay.  

But now I've realised I made a mistake (I thought it was asking if she every owned a share in the buy to let property, but it was asking if she had ever owned a share in any property) and I think there is stamp duty to pay....namely £2,562.

Once I've paid this.....how much of the property can I allocate to her for future tax purposes?

If I decided I didn't want this tax burden (just found out the house needs a complete re-wire) but I want to maintain my mortgage offer.....can I proceed without changing the ownership and therefore incurring the tax?

My legal questionnaire has these options.  Which would I select to keep her name on the mortgage but not incur the stamp duty?



Thanks,
R

I suggest you check the stamp duty position.  Is the property in England, so the relevant tax is stamp duty land tax?

How did you get to £2,562 as the stamp duty?  There is an SDLT rule that the extra 3% does not apply to transactions between spouses who are living together.  That might help in your case.

It's for a property that is let out, not the property we live in together.

propertyrental

https://www.patrickcannon.net/news/transfer-of-property-between-spouses/

What stamp duty is payable when transferring an interest in a jointly owned property?

The transfer by one spouse to the other of their share in the equity will not attract stamp duty if it is by way of gift and there is no mortgage debt being assumed by the receiving spouse. If the transfer is in connection with a separation or divorce, then a specific stamp duty exemption may be available. Careful planning and structuring of the arrangements to ensure that stamp duty does not arise may be required. HMRC have published this helpful example of how the rules have operated since November 2017:

“Mr I is transferring 50% of a buy-to-let property that he owns to his wife, Mrs I. Mrs I is paying some cash and taking over responsibility for half the mortgage debt. Mrs I owns no other residential property but Mr I owns a number of other buy-to-let properties.
For transfers before 22 November 2017, the higher rates will apply to the transfer as Mr I owns other residential properties. As a married couple other residential property owned by either spouse is taken in account in determining whether the higher rates apply.
For transfers on and after 22 November 2017, the higher rates will not apply as a transfer between spouses is disregarded as above.”

roadweary

Through my mortgage advisor I've been told that there is stamp duty as we both already own a property.  The sum under consideration is the mortgage amount - 90k.  As we are sharing the mortgage, the consideration is half of that sum.....so it's 3% of 45k

SDLT_Geek

roadweary said:

SDLT_Geek said:

roadweary said:

Hi,

I'm just about to re-mortgage adding my wife to the mortgage of a buy to let property.  We jointly own the house we live in.  To be transparent the idea was to reduce the tax burden as she is in the lower tax bracket.

I've had the house since around 2007.  Purchased for about £195,000 probably worth about £350,000 now.  Re-mortgage will be for roughly £90,000.

I've used an online calculators and thought there was no stamp duty to pay.  

But now I've realised I made a mistake (I thought it was asking if she every owned a share in the buy to let property, but it was asking if she had ever owned a share in any property) and I think there is stamp duty to pay....namely £2,562.

..............

My legal questionnaire has these options.  Which would I select to keep her name on the mortgage but not incur the stamp duty?

...............

I suggest you check the stamp duty position.  Is the property in England, so the relevant tax is stamp duty land tax?

How did you get to £2,562 as the stamp duty?  There is an SDLT rule that the extra 3% does not apply to transactions between spouses who are living together.  That might help in your case.

It's for a property that is let out, not the property we live in together.

roadweary said:

Through my mortgage advisor I've been told that there is stamp duty as we both already own a property.  The sum under consideration is the mortgage amount - 90k.  As we are sharing the mortgage, the consideration is half of that sum.....so it's 3% of 45k

The rule about the 3% surcharge not applying for a transfer between spouses is not limited to the property the spouses are living in.  It also applies to a let property.  So there should be no SDLT liability here.

roadweary

SDLT_Geek said:

roadweary said:

SDLT_Geek said:

roadweary said:

Hi,

I'm just about to re-mortgage adding my wife to the mortgage of a buy to let property.  We jointly own the house we live in.  To be transparent the idea was to reduce the tax burden as she is in the lower tax bracket.

I've had the house since around 2007.  Purchased for about £195,000 probably worth about £350,000 now.  Re-mortgage will be for roughly £90,000.

I've used an online calculators and thought there was no stamp duty to pay.  

But now I've realised I made a mistake (I thought it was asking if she every owned a share in the buy to let property, but it was asking if she had ever owned a share in any property) and I think there is stamp duty to pay....namely £2,562.

..............

My legal questionnaire has these options.  Which would I select to keep her name on the mortgage but not incur the stamp duty?

...............

I suggest you check the stamp duty position.  Is the property in England, so the relevant tax is stamp duty land tax?

How did you get to £2,562 as the stamp duty?  There is an SDLT rule that the extra 3% does not apply to transactions between spouses who are living together.  That might help in your case.

It's for a property that is let out, not the property we live in together.

roadweary said:

Through my mortgage advisor I've been told that there is stamp duty as we both already own a property.  The sum under consideration is the mortgage amount - 90k.  As we are sharing the mortgage, the consideration is half of that sum.....so it's 3% of 45k

The rule about the 3% surcharge not applying for a transfer between spouses is not limited to the property the spouses are living in.  It also applies to a let property.  So there should be no SDLT liability here.

I'd love to see where that is stated, because everything I have read states that because there is a mortgage, by being added to the mortgage there is that financial consideration.

propertyrental

roadweary said:

SDLT_Geek said:

roadweary said:

SDLT_Geek said:

roadweary said:

Hi,

I'm just about to re-mortgage adding my wife to the mortgage of a buy to let property.  We jointly own the house we live in.  To be transparent the idea was to reduce the tax burden as she is in the lower tax bracket.

I've had the house since around 2007.  Purchased for about £195,000 probably worth about £350,000 now.  Re-mortgage will be for roughly £90,000.

I've used an online calculators and thought there was no stamp duty to pay.  

But now I've realised I made a mistake (I thought it was asking if she every owned a share in the buy to let property, but it was asking if she had ever owned a share in any property) and I think there is stamp duty to pay....namely £2,562.

..............

My legal questionnaire has these options.  Which would I select to keep her name on the mortgage but not incur the stamp duty?

...............

I suggest you check the stamp duty position.  Is the property in England, so the relevant tax is stamp duty land tax?

How did you get to £2,562 as the stamp duty?  There is an SDLT rule that the extra 3% does not apply to transactions between spouses who are living together.  That might help in your case.

It's for a property that is let out, not the property we live in together.

roadweary said:

Through my mortgage advisor I've been told that there is stamp duty as we both already own a property.  The sum under consideration is the mortgage amount - 90k.  As we are sharing the mortgage, the consideration is half of that sum.....so it's 3% of 45k

The rule about the 3% surcharge not applying for a transfer between spouses is not limited to the property the spouses are living in.  It also applies to a let property.  So there should be no SDLT liability here.

I'd love to see where that is stated, because everything I have read states that because there is a mortgage, by being added to the mortgage there is that financial consideration.

Yes there is financial consideration, but that is not the point SDLT_Geek was making.:

The rule about the 3% surcharge not applying for a transfer between spouses is not limited to the property the spouses are living in.  It also applies to a let property.  So there should be no SDLT liability here.

and £45K (half the mortgage) is below the threshold for standard SDLT. So no standard SDLT and no 3% 2nd property surcharge.

Did you also read the link I provided earlier?

For transfers on and after 22 November 2017, the higher rates will not apply as a transfer between spouses is disregarded as above.”

roadweary

propertyrental said:

roadweary said:

SDLT_Geek said:

roadweary said:

SDLT_Geek said:

roadweary said:

Hi,

I'm just about to re-mortgage adding my wife to the mortgage of a buy to let property.  We jointly own the house we live in.  To be transparent the idea was to reduce the tax burden as she is in the lower tax bracket.

I've had the house since around 2007.  Purchased for about £195,000 probably worth about £350,000 now.  Re-mortgage will be for roughly £90,000.

I've used an online calculators and thought there was no stamp duty to pay.  

But now I've realised I made a mistake (I thought it was asking if she every owned a share in the buy to let property, but it was asking if she had ever owned a share in any property) and I think there is stamp duty to pay....namely £2,562.

..............

My legal questionnaire has these options.  Which would I select to keep her name on the mortgage but not incur the stamp duty?

...............

I suggest you check the stamp duty position.  Is the property in England, so the relevant tax is stamp duty land tax?

How did you get to £2,562 as the stamp duty?  There is an SDLT rule that the extra 3% does not apply to transactions between spouses who are living together.  That might help in your case.

It's for a property that is let out, not the property we live in together.

roadweary said:

Through my mortgage advisor I've been told that there is stamp duty as we both already own a property.  The sum under consideration is the mortgage amount - 90k.  As we are sharing the mortgage, the consideration is half of that sum.....so it's 3% of 45k

The rule about the 3% surcharge not applying for a transfer between spouses is not limited to the property the spouses are living in.  It also applies to a let property.  So there should be no SDLT liability here.

I'd love to see where that is stated, because everything I have read states that because there is a mortgage, by being added to the mortgage there is that financial consideration.

Yes there is financial consideration, but that is not the point SDLT_Geek was making.:

The rule about the 3% surcharge not applying for a transfer between spouses is not limited to the property the spouses are living in.  It also applies to a let property.  So there should be no SDLT liability here.

and £45K (half the mortgage) is below the threshold for standard SDLT. So no standard SDLT and no 3% 2nd property surcharge.

Did you also read the link I provided earlier?

For transfers on and after 22 November 2017, the higher rates will not apply as a transfer between spouses is disregarded as above.”

I did, but in that example Mrs I doesn't own any other properties.  So she's a first time buyer.  In my situation, both my wife and I jointly own a house.  And that's why according to other examples I've seen, there is SDLT to pay.

An example of when Stamp Duty Land Tax is payable if you’re given property as a gift

The owner of a property decides to transfer half of their share to their spouse. The owner does not take a cash payment for this share, but there’s an outstanding mortgage on the property.

Their spouse takes on the responsibility of 50% of the outstanding mortgage. If the amount outstanding that their spouse takes on is more than the current threshold, Stamp Duty Land Tax is payable.

and here

What property the higher rates apply to

When you know who the rules apply to, you should work out how many residential properties each of you will own at the end of the day of your new purchase.

If any of you will own, or part own more than one residential property worth £40,000 or more, you will have to pay the higher rates on your new purchase (unless there is another reason why the higher rates do not apply).

The higher rates

The higher rates from 23 September 2022

Property or lease premium or transfer value	SDLT rate
Up to £250,000	3%
The next £675,000 (the portion from £250,001 to £925,000)	8%
The next £575,000 (the portion from £925,001 to £1.5 million)	13%
The remaining amount (the portion above £1.5 million)	15%