Are property transfers between spouses taxed?

When you think about property and property investments the first tax that comes to mind is Capital Gains Tax (CGT).

You don’t pay Capital Gains Tax on assets you give or sell to your husband, wife or civil partner, unless:

• you separated and didn’t live together at all in that tax year
• you gave them goods for their business to sell on

The tax year is from 6 April to 5 April the following year.

https://www.gov.uk/capital-gains-tax/gifts

However, if your property has a mortgage transfering it could create a Stamp Duty Charge (SDLT).

You might pay SDLT when you transfer a share in a property to a husband, wife or partner when you do one of the following:

• marry
• enter into a civil partnership
• move in together

You pay SDLT if the consideration given in exchange for the share transfer is more than the current SDLT threshold for the property type.

Example 1 – you don’t pay SDLT

A house has a value of £180,000. The owner of the property has equity of £90,000 and an outstanding mortgage of £90,000. The owner transfers a half share of the property to their partner.

Their partner:

• pays cash for half of the equity – £45,000
• takes responsibility for 50% of the outstanding mortgage – £45,000

So the consideration for SDLT is £90,000, made up of the:

• cash payment
• 50% share of the outstanding mortgage

£90,000 is below the current SDLT threshold so there’s no tax to pay. You must still tell HM Revenue and Customs (HMRC) about the transaction on an SDLT return.

Example 2 – you pay SDLT even though no money changes hands

The owner of a property valued at £500,000 with an outstanding mortgage of £400,000 transfers half the property to their partner when they marry. Their partner takes on 50% of the mortgage (£200,000).

HMRC charge SDLT on the amount paid for a property or the amount of ‘consideration’ given.

By taking liability for the mortgage, the owner’s partner has given ‘consideration’ of £200,000 for their share of the property which is £1,500 SDLT (0% of £125,000 + 2% of £75,000).

They must pay SDLT on that amount and tell HMRC about the transfer by filling in an SDLT return.

The equity isn’t included in the calculation as you only pay SDLT on the consideration given.

If the transfer is a gift

If the transfer is a gift and there’s no consideration, SDLT doesn’t normally apply.

https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property

steve@bicknells.net