You may be considering transferring property or rental income to your spouse for a variety of reasons. The most likely reason that you would want to do this is because it makes good financial sense for you as a couple. Most significantly, there are often considerable savings to be made in terms of Capital Gains Tax or Inheritance Tax. This may be because one of you pays a lower rate of tax, for example.
How can this be done?
Conveniently, there are a number of different ways you can go about transferring property or rental income to your spouse. Therefore, you can simply choose the method that makes the most sense for your situation.
For example, there is the option of signing a deed of assignment. This is a type of contract which deals with larger transactions such as property or land. Seeking legal advice from experts such as Parachute Law can make the process of drawing up your deed of assignment easy and appropriate for your situation.
Transferring property between married persons can often negate the requirement to pay Capital Gains Tax on the property. Note that this doesn’t apply if you transfer a property to other relations, such as a sibling or a non-married partner.
Alternatively, some people opt to go through a process called a Transfer of Equity. This may apply if one of you owns a property and you wish to add your spouse’s name to the deeds so that you own it together.
For landlords, there’s the option to sever your joint tenancy and have a deed drafted in order to share the rental income for financial purposes.
Stamp Duty
Of course, there is also the option of a straightforward sale and purchase, where one spouse sells the property to the other. This may sometimes occur if a couple divorces, but is not limited to this scenario and therefore may be appropriate for you when transferring property.
Transferring equity: what to check first
Moving a share of a home to a spouse is usually done through a transfer of equity, which changes who appears on the deeds. Because ownership changes, it can affect any mortgage on the property, and you may need to remortgage when adding or removing an owner, so speak to your lender or a mortgage adviser early. Legal advice from someone experienced in transfers is also wise.
Stamp duty can be payable where something is given in return for a share, for example when the person receiving it takes on a larger part of the mortgage. If a share is transferred for less than its market value, check how that affects capital gains tax and inheritance tax.
You will also need to decide how the property is held. Joint tenants have equal claim to the whole property, and it passes automatically to the survivor on a death. Tenants in common can hold unequal shares that do not pass automatically, and a declaration or deed of trust may be worth creating.
Stamp duty on transfers between spouses
Stamp Duty Land Tax is usually linked to buying and selling property, where the amount due depends on the price and the thresholds in force at the time. Transferring equity is a different kind of transaction, and the rules can be complex, depending on where the property is, the nature of the transfer and the financial arrangements between the people involved.
Moving property between spouses on separation is known as a matrimonial property transfer. Its aim is a fair division of assets, and it normally needs legal documents such as a transfer deed to record the change of ownership formally.
SDLT is not charged on transfers between spouses or civil partners in specific circumstances: where the transfer forms part of a formal written divorce or separation agreement signed by both parties, or follows a court order on divorce or the dissolution of a civil partnership. Because the conditions are strict, take legal advice before any transfer to avoid an unexpected tax bill.