Transferring half a btl to spouse prior to sale

[NeighbourDamage]

This is a bit niche, and the house isn't strictly a btl.

I inherited my dad's home some years ago, and it's been rented out ever since. It's in my sole name, and there's no mortgage. I am now hoping to sell to the tenants. This has been going on for some years, but I think they might finally be in a position to buy.

I've read online that if I transfer half the equity to my husband, I'll benefit from two lots of annual CGT exemptions instead of just mine. Has anybody done this?

I'm wondering whether to do this now. Then when the tenants are ready, go ahead with the sale. But have other people done the transfer at the same time as the sale? Is that even possible? (DH and I are almost retired, and have negligible earnings at the moment.)

I'd be interested to hear any experiences, before I talk to the solicitor, as I don't want to appear totally confused, even if I am!!!

No experience, but as you’ve not had any replies, I’ll add my understanding from having transferred a house from joint ownership to sole rather than the other way around.

Firstly, is the half of the house that you’re selling above the stamp duty threshold? If it is, then you’ll have to balance the change in CGT with the cost of stamp duty and solicitors etc for handling selling it to your DH.

You say you’ve had the house “for some years” is it long enough that it’s increased in value a lot? Remember that you only pay CGT on the increase in value since you inherited it, not the whole value. Apologies if that’s obvious, but I know a few people who have been confused by that.

I believe you can also claim two years worth of CGT allowances if you didn’t use last years allowances, but check that with your accountant! And obviously offset against any capital losses (if you’ve got any losses that you could crystallise in the same year, that’s a good strategy).

You won't pay stamp duty land tax on a transfer to spouse unless it is mortgaged. I wouldn't transfer more than necessary to use his cgt allowance and keep you both under the relevant income tax threshold (I.e. you have no income so the gain should mostly be taxed at 18% rather than 28%).

Even then you won't save much, so just check cost of transfer versus savings. Also if you transfer into joint names the income from the tenants will belong partially to your spouse until you later sell to them.

Thank you for your replies, much appreciated. Yes, it's in England, and not mortgaged, so there's no stamp duty to pay.

Also, DH has some shares through a work scheme before he retired, and if he sold them now, it would be at a loss, so that could be offset against the capital gain in the house.

The cost of transferring would be £70 plus the cost of getting a solicitor to do ID1 checks (£50 each), as we can fill in the necessary forms ourselves.

I guess my question is, if I do the transfer now, and it takes ages, will that delay the sale?
Or if I leave it until the sale, is it possible to do it at the same time?

I'd be interested to hear any experiences, before I talk to the solicitor, as I don't want to appear totally confused, even if I am!!!

A tax consultant will be very used to explaining things to a confused client. It's part of the job.

I would check your proposals with:

• your solicitor
• a tax adviser
• a financial planner

You might find someone that can do both of the last two together. You're both approaching retirement so you need to think about what you're going to do with the proceeds, tax implications beyond CGT, inheritance and wills, etc. Including plans both if and if you're not correct in the assumption the tenants are currently ready to buy.

Solicitors are used to talking to confused people. Don't worry about that bit.

Another thing to be aware of. ( if the tenant needs a mortgage to buy) is that lenders can refuse to lend where all sellers haven’t owned the property for at least 6 months

I don't think we need a tax consultant, as the tax stuff is all clear 🙂 which is why I'm transferring some equity.

My query is in the practicalities. We could do the transfer now, hoping the tenants are finally ready to buy, or leave the transfer until we actually sell. (Income-wise, it won't make any tax difference to us.)

Your replies have helped me clear my thoughts. 🙂 I rang LR, who said there's a six-month backlog, but they can expedite it if necessary. So we can go ahead now, and it won't matter if it's not gone through.

SigrunGard* *Thank you, I wasn't aware of that. I'll look into it, as that might be a problem.

No problem- it’s not a well known point at all and catches many people out.