Transfer of equity to spouse, diy possible?

Sparks33

I have a property which is in my name only, purchased in 1992, and currently rented out. Property value around 200k, BTL mortgage of around 110k. I am self employed, but only work part time now due to health issues (arthritis) I'm trying to keep my turnover below 20k to avoid the extra hassle of the new MTD rules. This is difficult however, as the rental income counts towards this. My plan is to transfer the property as a gift to my spouse (who doesn't own any other property) and for her to take over the mortgage and receive any rental income. However, has anyone here managed to DIY this procedure? I'd rather not get solicitors involved if I can help it, so any advice much appreciated :-)

Isthisforreal99

What have the mortgage company said about you doing this? You can't just transfer the mortgage to her. She would need to get a mortage in her own name.

Also your self-employed turnover and your rental income turnover are 2 distinct things. And MTD will eventually apply across the board anyway.

Sparks33

https://forums.moneysavingexpert.com/discussion/comment/82052200#Comment_82052200

The mortgage company were pretty useless, spent about an hour on the phone trying to get clear answers but still unsure. They seemed to suggest I'd need to put my wife on the mortgage first, with joint names on the title deed, then transfer the property to her soul name if I wished. Seems overly complicated, and expensive if I have to pay to have this done. My self employed turnover, as well as rental turnover, count towards the £20k MTD limit. If I offload the rental to my wife, then that leaves me free to earn upto £20k (turnover) without having to do the MTD . Are you saying that MTD will eventually affect everyone, whatever their turnover?

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/comment/82052322#Comment_82052322

Nothing overly complicated about it tbh, the bank lent you money to purchase the property, not your wife. They have suggested a solution, either way it will incur costs for you.

Yes,I believe MTD will eventually apply to all self-employed,it's effectively being phased in.

mta999

I am guessing there would be no cgt to pay as the transfer is to spouse?

sherlock228

https://forums.moneysavingexpert.com/discussion/comment/82052200#Comment_82052200

for MTD purposes the 2 are added together and count as a single "turnover" value. Therefore, as OP rightly identifies, if that is more than 20k turnover in current tax year (26/27) then MTD will kick in wef 6 April 28

sherlock228

https://forums.moneysavingexpert.com/discussion/comment/82052692#Comment_82052692

correct, no CGT, she takes it on at his original purchase cost and therefore any gain is calculated from date of original purchase, not date of transfer between the married couple

sherlock228

https://forums.moneysavingexpert.com/discussion/comment/82052322#Comment_82052322

If the only reason for this is income tax (MTD) then why change legal ownership anyway in the first place?
Obviously the lender will not permit a change of ownership on a property that secures a loan in the sole name of someone who will no longer legally own that security. so they are reasonable to suggest:
a} Wife becomes party to existing mortgage, lender subsequently agrees to allow her sole liability for the existing mortgage and permits change of legal ownership to sole name.
or
b) mortgage is paid off in full. Legal ownership placed in sole name, wife applies for new mortgage in her sole name.

BUT why waste money doing that….. it is perfectly possible for a married couple to split the income for tax purposes on a property that only one of them legally owns.

Income is taxed on the basis of beneficial ownership, not legal ownership, so what you do is create a beneficial interest in the property for the wife without impacting the legal ownership. It needs a Declaration (or Deed) of Trust and a Form 17 sent to HMRC. No need to involve the lender at all, your tax affairs are no business of theirs. Original BTL mortgage remains in his sole name as he remains sole legal owner and solely liable for the debt, so no need for conveyancing either.

I assume OP is not using an accountant, so he can research how to do that himself, here is a start
Property: A Declaration of Trust

Declare beneficial interests in joint property and income - GOV.UK

PS changing the beneficial ownership will also make her liable for the respective share of that for CGT purposes. Legal ownership is not the only basis for CGT in respect of property when the property is sold with a beneficial split still in place.

theartfullodger

Of course relationships never fail or break down.

Artful, on 3rd successful marriage, aged 78