Moving Properties into Joint Ownership to Avoid Income Tax
Because you can save tax by holding your property in a partnership, you may well be thinking about how to transfer to joint ownership.
It is actually very easy to do and you will incur no capital gains tax liability if you are transferring part ownership to your spouse, i.e., your husband or wife.
PLEASE NOTE: if part ownership of the property is to be transferred to anyone other than your spouse, there may be a capital gains tax liability triggered.
Three Simple Steps to Follow
The following three steps will show you how you can transfer the property into joint ownership.
STEP 1. Contact your mortgage lender.
Tell your mortgage lender that you want to transfer the property into joint ownership, and explain why you want to do this.
Your mortgage lender will then send you a new mortgage application form for you to complete in order to move the property into joint ownership.
Unfortunately, lenders will treat transferring an existing property into joint ownership as though you are applying for a new mortgage. Therefore, it is very likely that you will have to submit the same paperwork again and effectively apply for a new mortgage.
It is likely that the property will be put into joint names on the same terms as the original contract; that is, if the original mortgage was fixed at 4.99% and had four years left to run on the fixed period, the new mortgage will be the same.
However, if mortgage rates have reduced, then be cheeky and ask if you can also have it at the new reduced interest rate!
STEP 2. Contact a solicitor.
Once your mortgage application has been approved, your solicitor can have all relevant documents changed into joint names pretty quickly. It usually takes about four weeks to complete all the legal paperwork.
Also, tell your solicitor whether you want the property to be owned as ‘Joint Tenants’ or as ‘Tenants in Common’, and how you want to split the ownership of the property. For example, you may want to hold the property in the majority of the lower rate tax payer, so that you pay less tax.
Whenever a property is being purchased by more than one person or transferred into multiple ownership, your solicitor should always ask you how you wish to hold the property.
STEP 3. Notify HMRC
If you decide to have an unequal ownership split, tell HMRC of this split as soon as possible.
Don’t delay in notifying HMRC as it could well cost you in tax penalties.