How to transfer rental income to spouse
(Last Updated: 21/11/2024)
10/06/2023
576
6 min read
Husbands and wives benefit from being able to transfer rental income from a buy to let property between each other, without triggering Capital Gains Tax or Additional Rate of Stamp Duty, where they gift the equity for no consideration. You can transfer rental income to your spouse for HMRC declaration using the following processes:
- Deed of Assignment. Whether you are both named on the title or not, you can assign the beneficial interest to your spouse using a deed of assignment.
- Sever Joint Tenancy and Draft a Deed. Where you own a buy to let as joint tenants, you need to sever the joint tenancy to be tenants in common and then share the rental income using a deed. You'll need to file a Form 17 and attach the deed to declare to HMRC what your actual shares are to the rental income.
- Transfer of Equity. Where the property is solely owned, you can add your partner onto the legal title following the transfer of equity process. Where there is a mortgage, you'll need mortgage lender consent and most likely have your spouse's name added to the mortgage.
- Sale and Purchase. This is the most costly option, as the current owner is removing themselves completely from the title of the property and their spouse will be the new owner. This type of transfer rental income to spouse would normally be a part of a divorce settlement.
You are liable for tax, in the share you own, on the day the rent is paid. You must file a tax return and pay your tax to HMRC by the 31st January, for the previous year's rental income received from the tenant up to the 5th April. The sooner you action the above, the sooner you can declare the rental income in the shares you want.
What tax is payable on transfer between spouses?
Capital Gains Tax
Capital gains tax is payable on the disposal of any property that isn't your Principal Private Residence (PPR) and you can only have one PPR. The CGT rules are different depending when you dispose your rental property to your spouse. Under the Taxation of Chargeable Gains Act 1992 - S.58 - Husband and Wife it states: "If, in any year of assessment, and in the case of a woman who in that year of assessment is a married woman living with her husband, the man disposes of an asset to the wife, or the wife disposes of an asset to the man, both shall be treated as if the asset was acquired from the one making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal".
Read more here - Capital Gains Tax on Property for Married Couples.
Additional Rate of Stamp Duty Land Tax
The 3% additional rate of SDLT applies to any second home where the transfer consideration is over £40,000 - the consideration could be the mortgage share taken on or any money changing hands. HMRC state "For transfers on and after 22 November 2017, the higher rates rules disregard transactions solely involving the transfer of interests between spouses or civil partners while they are treated as living together on the date of purchase. ‘Living together` takes the definition in section 1011 of the Income Tax Act 2007. A married couple or civil partners of each other are treated as living together unless they are separated under an order of a Court, or they are separated by a formal deed of separation, or they are in fact separated in such circumstances that the separation is likely to be permanent".
Read more here - Stamp Duty on Transfer of Property Between Spouses.
Normal Rate of Stamp Duty Land Tax
You could trigger the normal rate of stamp duty, when splitting rental income for tax purposes, if the mortgage debt taken on by a spouse who is named on the mortgage is in excess of the current rate of SDLT. The current rate for SDLT is as follows:
| Property Price | Standard Rate of Stamp Duty |
| £0 - £125,000 | 0% |
| £125,001 - £250,000 | 0% |
| £250,001 - £925,000 | 5% |
| £925,001 - £1.5 million | 10% |
| Over £1.5 million | 12% |
What are the costs to transfer rental income to spouse?
Type of Process | Cost | Timeframe |
Deed of Assignment | £240 INC VAT | 1 to 3 working days |
Sever a Joint Tenancy Including a Deed | £500 INC VAT | 1 to 3 working days to draft the deed and 1 to 3 weeks for Land Registry to Sever the Joint Tenancy. |
Transfer of Equity | From £363 INC VAT, leaseholds will cost more. If both parties need representation, this may be more as well. | 4 weeks for a freehold, 8 weeks for a leasehold (subject to lender consent). |
Sale and Purchase | From £800 INC VAT per transaction, leaseholds will cost more. | 8-12 weeks for a freehold, 12+ weeks for a leasehold (subject to new lender for financing). |
Frequently Asked Questions
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Written by:
Andrew Boast
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.
Reviewed by:
Caragh Bailey
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.
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