Want to transfer 50% of property to spouse ahead of sale CGT

tillycat123

Hi - I have a second property that I own no mortgage that my son lives in rent free, he covers the bills, it’s a long story!

Anyway he is now moving out buying a place of his own next year.

I have owned the house for 10 years and possibly looking at a gains of 80 - 100 thousand. I have not ever lived there.

Can someone kindly tell me the steps I need to take to transfer 50% to my husband so we can share the CGT liabilty when we come to sell next year?

I am getting really confused what I need to be doing, is it beneficial interest I need to have a solicitor draw up?

thank you!

poseidon1

I would question that if CGT is the only thing that concerns you, whether there is any real benefit gifting half to your husband.

You are already aware that the  annual CGT exemption has been reduced to a virtually meaningless £3,000. 

Gifting half the property to your husband would save a maximum of £720 pounds in tax ( at the top rate).  Therefore any amount you spend in fees to execute the gift  reduces the net tax saving.

You need to decide if the time,  effort and costs of a transfer  are worth the paltry tax savings. I personally wouldn't bother.

Might have been a more sensible course of action, if you were keeping it as a rental investment and looking to mitigate long term income tax exposure ( please note that this is not reccomendation you become a long term landlord!).

Jeremy535897

It's not just the annual exemption, but whether your husband has a lower capital gains tax rate on at least part of the gain as you would. If he has no basic rate available for capital gains, it really isn't worth doing, as the benefit is only £3,000 at 24% =  £720 (assuming he has no losses brought forward and has no other chargeable gains).
I assume there is no mortgage, as this adds more problems?
I have always advised clients to employ a solicitor to draw up a declaration of trust to transfer half the beneficial interest in the property, which avoids having to involve the Land Registry. I am assuming you and the property are in England or Wales? There is also now the requirement to register the trust with the Trust Registration Service, which will add further costs.
The best advice on timing is to do it before the contemplation of a sale, but you are past that. It is strongly recommended that you do it well before instructing estate agents and/or solicitors regarding the sale. It is always possible that HMRC will challenge the gift, but if there is real doubt that the sale will take place, I have not known HMRC cause difficulties. Others may be more cautious.

tillycat123

Thank you both,

 if the house gains £100k am I working this out incorrectly?

I earn £40k  so the gain will be pushed into the higher bracket.

My husband operates through his own ltd company so could potentially draw just £12570 and not take a dividend.

No mortgage so hefty CGT if just left in my name or am I missing something?

Isthisforreal99

tillycat123 said:

Thank you both,

 if the house gains £100k am I working this out incorrectly?

I earn £40k  so the gain will be pushed into the higher bracket.

My husband operates through his own ltd company so could potentially draw just £12570 and not take a dividend.

No mortgage so hefty CGT if just left in my name or am I missing something?

Why do you think a mortgage will be relevant? It makes no difference for CGT whether it was mortgaged or not.

Seems it would be beneficial in your scenario to put it into joint names before disposal but seek professional advice and as above not immediately before sale. HMRC can challenge such contrived transactions.