Transfer ownership of house to wife or spouse

20/11/2019
To transfer ownership of property to your wife or spouse is common practice where to do so it is advantageous from a tax perspective. There are however things to consider such as does the transfer of property to your wife attract stamp duty (which if there is an existing mortgage then there could be, but not second home SLDT) or is there any Capital Gains Tax to pay? . We run through below how to transfer ownership to your spouse for tax purposes or to add their name onto the legal title, not for divorce proceeding which you can read more on here - Transfer of Equity. In this article we examine:

  • How to transfer ownership of property to your wife/spouse
  • Do you always need to transfer your spouse onto the property to get a tax benefit?
  • SDLT and Capital gains tax on transfers of property to spouse

Before progressing on it is important to understand the difference between the legal owner of a property and who benefit from the property; such as property income or the right of use.

  • Legal owner - the legal owner/s are registered at the Land Registry on the title deeds. You can have a maximum of 4 legal owners registered on the title and they have control over when the property is sold or transferred. Legal owners are also known as nominees or registered owners.
  • Beneficial interest - is "an interest in the economic benefit of property". Your beneficial ownership in property reflects your share of any gain/loss from the property including rent and profit/loss on sale. You do not have to be a legal owner to be a beneficial owner. Many married couples share the beneficial interest with their partner but don't share the legal title because if their intention is to share property income in a tax efficient way then there is no need to change the legal ownership.

Transfer of Property in Unequal Shares - Beware of Form 17

When looking to share income from property, such as rental income or capital increases, in unequal shares then it is the beneficial interest that has to be shared, not the legal ownership. The legal ownership is registered on the title deeds at the Land Registry and doesn't confirm who has a beneficial interest in property (although the HMRC will assume the beneficial interest is shared equally between the legal owners unless there is a deed of trust confirming otherwise). This is covered under the HMRC rules of Form 17 for married couples who joint own the legal title, but share the income from property in unequal shares.


How to transfer ownership of property to your wife

There are many ways to transfer property to your wife/husband so they can get a share of the beneficial ownership, however they depend on your current circumstances.

    1

    Property in sole name

If you already own the property and it is in your sole name then these are a few options to consider in order to transfer the beneficial interest to your wife/husband.

Transfer of Equity


In this scenario the intention is to transfer title to wife/husband (legal title) so they are added to the deeds of the property as joint legal owners and to share the beneficial interest in unequal shares. In most cases the partner is transferred onto the legal title for zero consideration (no additional money changing hands) and at the end of the transfer you jointly own the legal and beneficial interest. Here are some other points to be considered:

  • Stamp Duty Land Tax - Click to read what stamp duty land tax is payable on a transfer.
  • Deed of Trust - when sharing income from property in unequal shares you are required to complete a Form 17 to HMRC and provide a deed of trust conforming the beneficial interest split between the joint owners. If you fail to do this HMRC presume that income from property is shared equally between the joint owners.
  • Mortgage Lender Consent - most mortgage lenders won't allow you to transfer beneficial interest to someone not a party to the mortgage. In these cases you should look to assign the beneficial interest instead using a deed of assignment.

What is form 17?

HMRC states: "If you live together with your spouse or civil partner, we normally treat income from property held in your joint names as if it belonged to you in equal shares and tax each of you on half of the income, regardless of actual ownership. Please complete this form if you want to be taxed on your actual shares (known as `actual basis'). You will also need to provide evidence that your beneficial interests in the property are unequal, for example a declaration or deed ."



Deed of Trust


HMRC Guidance note states:
"For the starting point in TSEM9160 not to apply there must be a separation of income from property, by way of a valid declaration or deed of trust.

For example, in an interest in possession trust (TSEM1105), the trustees own the trust property, but they are not entitled to the income arising from the property - the beneficiary is. By way of a valid deed, the settlor has specifically given the income from the property to the beneficiary. So the presumption that income follows property does not apply in this instance."

As we see from the HMRC guidance note the legal owner can use a deed of trust to share the beneficial interest in the property (the right to rental income and capital gain) to their spouse or partner. The points to consider are:

  • Stamp duty land tax - under If you marry, enter into a civil partnership or set up home together HMRC states "You might pay SDLT when you transfer a share in a property to a husband, wife or partner when you do one of the following: marry, enter into a civil partnership, move in together". We explain stamp duty for transfer between marital couples in our article here - transfer of property to your wife attract stamp duty
  • Beneficial owner has no legal owner rights - unless written into the deed of trust, the beneficial owner has no legal right to force the sale of the property so they can receive their beneficial interest from a potential capital gain via sale
  • Deed needs to be registered - a deed of trust needs to be registered with a Form B restriction placed over the title deeds at the Land Registry to protect the non-legal owner from the property being sold without their knowledge.

Do you need help transferring the ownership of property to your partner?

Our panel solicitors specialise in this area and can support you execute the legal service for any of the following:

  • Drafting of deed of trust
  • Registering deed of trust at Land Registry
  • Transfer of equity

Specialist in Marital Transfers (gift, divorce or for tax purposes) - Fixed Legal Fees - Fast Completions

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    2

    Property owned jointly

If you already own the property jointly then these are a few options to consider in order to transfer the beneficial interest to your wife/husband.

Deed of Trust


Much like in the example above, a deed of trust can be used to declare an unequal beneficial interest between the joint owners. Other than the points raised above, the additional point to consider is if you currently own the property as Joint Tenants or Tenants in Common. If you own the property as joint tenants then you'll need to change the ownership to tenants in common before you can register the deed of trust. You cannot own a property as joint tenants and have a deed of trust.

    3

    Not purchased property yet

If you have yet to purchase the property then you can choose to buy the property as tenants in common and draft a deed of trust to reflect unequal shares in the property.

We can help with the transfer beneficial title

Our solicitors specialise in transferring property and offer support around this complex area. To get a quote or to discuss your circumstances you can get in contact by clicking here and we will email you back or you can call us today on 0333 344 3234 (local call charges apply).

Frequently Asked Questions

What are the risks of transfer ownership of property to wife?

The benefit to utilise the tax saving of your partner is a huge draw to transfer your beneficial interest, however if you break up in the future then you may struggle to reclaim the beneficial interest you have stated in a deed belongs to your partner. For more information read Splitting up with partner? Are you due money from the property?

How do I transfer ownership of house to family member?

Gifting property is very common, however it has tax implications and often has to be handled as a 'Concessionary Purchase'.

How much does it cost to transfer title deeds?

As we've seen above there are several routes to choose from when transferring property to your wife however we give indicative costs below:

  • Freehold Transfer of Equity (no change to mortgage) - £400 INC VAT for Solicitor's Fees plus disbursements (the legal fees will be more if the property is leasehold and/or you are changing
  • Deed of Trust - £240-£599 INC VAT
  • Register Deed of Trust - £260-£360 INC VAT plus disbursements

Related News Articles

 
Deed of Trust
23/10/2019
Gifting Property - 4 ways to gift your property
03/12/2019
Stamp duty on transfer of property between spouses
28/10/2019
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