Tax implications of transferring property into joint ownership.
Question Currently my sole name is on the house deeds and mortgage. I live with my partner and we wish to extend the property and consequently the mortgage. The mortgage company will give us a joint mortgage but require the deeds changing to joint names. I have been told that if we do this my partner will have to pay tax on the assets of the equity or value of the house. Is this true and if so, how can we avoid it?
It is not true that your partner will have to pay any tax on the transfer of half the house to them, as through outdated tax laws partners are not regarded as connected persons for capital gains tax purposes.
The transfer should be by way of gift or sale, and you will need a solicitor to draw up the necessary papers to effect the transfer tax efficiently.
Bear in mind that you can transfer the property for any value at all, so a value sufficient to utilise your capital gains tax annual exemption may be an idea, if PPR relief is not in point.
Your partner's base cost will be the value stated, so it is worth making sure this is as high as possible. If PPR applies, then sell her half the property for the current market value and claim your PPR relief on the gain realised.
This money can be owed to you permanently.
There will be Stamp Duty Land Tax (SDLT) to pay on the value of the transfer and also if the property is gifted this is treated as a PET for IHT purposes.
If there is an element of bounty you will also need to consider whether the pre-owned assets legislation could possibly apply in future. Consult a solicitor used to dealing with property transactions for full advice before proceeding.
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