What's the process to Transfer Ownership of House to Spouse?
Most transfers between spouses or civil partners are for tax structuring on buy-to-let property and don't require the property to be sold to do it. This is because HMRC allows married couples to gift property to each other without incurring capital gains tax, which allows them to share rental income with their spouse, who is in a lower tax bracket; for some, this could mean they pay no tax on their rental income.
Transferring property can be as simple as completing a legal document or a Transfer of Equity. We tell you exactly what to do so you can share property income in a tax-efficient way before your next rental payment comes in. Plus, we include the forms you must submit to HMRC to avoid the transfer being ignored for tax purposes.
There are other reasons for a transfer, such as part of a divorce or before you're made bankrupt, which we explain towards the end of the article.
How to transfer ownership of a house without selling
There are several ways to achieve the same result, so we explain how best to do each below if you own a buy-to-let on your own, or jointly, or if the transfer is part of a divorce.
Deed of Assignment
You don't have to be named on the legal title at the Land Registry to share income with your spouse. Your husband or wife can transfer the benefit of the income (beneficial interest) to you and still be the sole legal owner.
A Deed of Assignment is the fastest way to transfer property to your wife as a gift. The deed transfers your beneficial interest to allow your spouse to receive the income.
The deed can be drafted in a matter of days by a solicitor, and the transfer takes place as soon as the deed is executed. The Land Registry hasn't been updated, but you must register the deed with HMRC. Some mortgage lenders do not allow this transfer.
We charge a Fixed Fee of £255 INC VAT and deeds are drafted within 1 to 2 working days (i).
Sever the Joint Tenancy
Married couples often own property as joint tenants and, as such, can't share property income other than equally. To share in a tax-efficient split, you must sever the joint tenancy to hold the property as tenants in common and then draft a Deed of Assignment.
A solicitor can draft the deed in a matter of days, and the transfer occurs as soon as the deed is executed. The Land Registry is updated, and you need to register the deed with HMRC using Form 17.
We charge a Fixed Fee of £260 INC VAT to sever a joint tenancy and applications are made online to the Land Registry within 5 working days (ii).
Divorce Order
The divorce order confirms how to transfer the property, but commonly one spouse keeps the property, and another is removed using a Transfer of Equity.
With completion within 4 to 8 weeks, the transfer is faster than a sale and purchase with the transfer being confirmed using the Land Registry Form TR1.
In some scenarios, if there is a mortgage, the divorce order may require the husband/wife to transfer the property to their spouse as part of the divorce order so they own no benefit from it, but they remain on the legal title and mortgage. This could last until their children reach 18 or 20 years old. Read more: How to make a declaration of no interest as part of a divorce.
Our solicitor fee starts at £399 INC VAT to remove a name from a property and can be completed within a few weeks (iii).
Do I need a solicitor to transfer property to my wife?
You need a solicitor to transfer a house to your spouse, whether as simple as drafting a deed or updating the Land Registry.
The process relies on a solicitor to verify your ID with a Land Registry Form ID1 or for their legal drafting to confirm the beneficial interest split.
We specialise in transferring property between spouses, so call us today to find out how we can help you on 0333 344 3234 (local call charges apply) / help@samconveyancing.co.uk, or Ask a Question.
What is the cost to transfer property?
It depends on which route you choose:
- £255 INC VAT for a Deed of Assignment.
- £260 INC VAT to Sever a Joint Tenancy if you pay a solicitor to update the Land Registry, or free if you do it yourself.
- £399 INC VAT (iii) for a Transfer of Equity if you pay a solicitor to update the Land Registry.
- If you don't have a solicitor to update the Land Registry, you need a Form ID1 at the cost of £100 INC VAT
What tax is payable when transferring property to your spouse or civil partner?
The 4 main taxes are Capital Gains Tax (CGT), Stamp Duty Land Tax (SDLT), Income Tax, and Inheritance Tax (IHT).
- 1
Capital Gains Tax
There is no Capital Gains Tax when a spouse or a civil partner transfers property to their partner as a gift. This means you can assign some or all of a buy-to-let property without filing a tax return. You will need a deed to confirm the beneficial income split between you and your spouse.
When you come to sell the property in the future, the deed is used to distribute the net sale proceeds. You need to file individual tax returns and pay any tax within 14 days after the completion of the sale. Click here to: HMRC - Calculate CGT on Property Sale.
You can't state that you own a different capital gain interest than your income tax. HMRC states: "A couple cannot make a declaration where the split of beneficial ownership of the asset and of the income from it differ". Read more - CG22020 - Transfer of assets: spouses or civil partners: jointly held assets.
- 2
Stamp Duty Land Tax
The property transfer triggers the potential for stamp duty. However, you only pay tax on the consideration. Consideration is any money being paid for the share in the property or the existing debt taken on. Existing debt is any mortgage on the property.
If there is no consideration, there is no stamp duty. If there is any amount of consideration, you must file an SDLT return and pay any tax due within 14 days of the transfer. Read more: Stamp Duty on Transfer of Property Between Spouses.
- 3
Income Tax
Once you have completed the transfer on a buy-to-let property, you must inform HMRC of the property held in trust. You can do this using the HMRC Form 17 for jointly owned property. For all other transfers using a trust, you need to register them with the HMRC Register Service.
Failing to register a trust with HMRC could attract a penalty of up to £5,000.
- 4
Inheritance Tax
When you die, you can pass a home to your spouse or civil partner, and there is no Inheritance Tax to pay.
What are the risks of transferring property ownership to my spouse or civil partner?
Divorce
The risk is that if you break up, the asset forms part of your spouse's assets. This doesn't mean your wife keeps the property after the divorce because all assets are declared as part of the divorce proceedings, and the courts distribute these. However, this means that until the divorce is finalised, any rental income is shared in the split you transferred.
Tax Allowances on Sale
Most transfers for tax purposes assign 100% of the rental income to maximise the lower banding for tax of the lower-earning spouse. This is fine for rental income, but when you come to sell the property, you will miss out on the CGT tax-free allowance of the higher-earning husband.
You can avoid this by drafting a new deed and filing it with HMRC before you sell your buy-to-let. However, you must consider the above, as the transfer can trigger stamp duty.
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
