Any help/guidance/thoughts on the below would be greatly appreciated!
I purchased a property in August 2012 for £117.5k which I lived in as my PR for 26 months. Since then, it has been rented out and is now worth approximately £200k with an outstanding mortgage of ~£80k. So I am currently sitting on a gain of ~£82.5k, but if my maths/interpretation of the Tax reliefs in correct, I can offset this through a combination of allowances for the time I lived there (26m/76m) + the 18 months allowed (18m/76m) = (44m/76m) or 57.9% relief against the total gain with the remaining £34.7k gain being covered by Letting Relief. So if I sold today I would pay no CGT.
I don't really want to sell as this is a nice asset with a great rental yield but I am conscious that my primary residence relief is reducing by the day and in April 2019 the last 18m grace period will be reduced to 9m and I will loose the Letting relief. I am also near the income threshold for tax-free childcare so continuing to own the property puts that at risk.
So my thought is that I could transfer the property to my partner (we are not married) to crystalise my CG taking advantage of the CGT reliefs above as well as mange my income below the TFC threshold. However because there is a mortgage outstanding, I think that the neatest way to do this is to add her to the existing mortgage and undertake a "Transfer of Equity" so that she takes say 95% of the equity and I retain 5% - because we are not married, I understand this transfer would be at market value (i.e. £200k). This means that I can crystalise 95% of my existing gain leaving me with a remaining gain below the AA should we sell at a later date. She can then take 95% of the income and I will take 5% which would be below the £1,000 threshold.
Am I right in thinking she will pay SDLT on the portion of the mortgage she takes on (i.e. £80k x 95% x 3% because this is a second property)?
Does the above approach work??
Thanks in advance!!