SDLT query (whole/majority transfer of equity to wife?)

[Hoang]

Hi,

I have tried searching the forums (back to 2009 threads) but weren't able to find an answer to my query. I would be very grateful if anyone can offer any advice for my situation.

I have fully paid of my house (end of 2010) which is valued around 240k. This was purchased by me alone in 2002 for 149k.

Since then I have married my wife and we are hopefully soon to be buying a bigger house as we have 1 child and 1 coming soon (mortgage has been arranged and some family members are lending me cash to avoid me causing a chain so not depending on sale of 1st house)

However, I am trying to sell it .. just so that we have more cash for a rainy day and so I can pay back family members asap. Finding a buyer is hard at the moment with mortgages quite hard to come by for FTBs.

Anyway, as an alternative I/we are considering potentially renting out the 1st house. Problem is the house/deeds are in my name only and I would therefore be liable to 40% tax.

My wife has never bought a property. What is the best way to:

a) Have the 1st house in her name only without incurring charges/taxes possible? (or as much as possible, is 99% her and 1% me)
b) Would my wife be free from SDLT as she is a FTB and house is valued below the 250k threshold?
c) When letting out the 1st house, would my wife only have to pay tax above the £7,475 personal allowance at the 20% rate? (assuming the house was transferred to her name only)
e.g. £10,000 a year in rental income, she would fill in her tax returns and only pay 20% on the £2,525

If I have misunderstood, please feel correct me

Cheers,
Hoang

[Peter D]

a/. Read HS283 on the HMRC web site. As you are the sole owner be aware that the property attracts PRR and, in the longer term, Letting Relief. If you do an interspousal transfer on a no gain, no loss basis of a share of the property whilst you are still living there then she will inherit your PRR and LR status. If you do this transfer after leaving the property she will not inherit and you will effectively loose PRR and LR on her share. You must do the transfer whilst you both reside in the home and at least a month prior to any Exchange of Contract.
Legal ownership and Beneficial ownership can be different. A Declaration of Trust can be drawn up that defines the beneficial ownership whilst the legal ownership remain unchanged. Speak to a legal professional on this issue.
SDLT will not apply.
b/. Your wife will not be regarded as a FTB, You both have to be FTB to qualify.
c/. Yes But remember you need to retain a share in property 1 so on disposal you to can use your CG Allowance to offset against any CGT liability.

Be aware that you can raise equity on your existing house and any interest is deductible against the rental income when you move out and rent it. However it is only the interest and your mortgage provider may want to up your interest to a Buy to Let rate, some providers do not, you will have to check it out.
Also be aware that if you did raise equity to purchase your new home you need permission from the provider for the change of use. Regards Peter