When we moved, we decided to rent out our old property rather than sell. As I was a higher-rate taxpayer we transferred ownership to my husband. He took out a mortgage on the property in just his name. The property has been rented out since then.
We’re now considering putting it back into joint names as we are both retired and only have my occupational pension and the rental income. Neither of us is a higher-rate taxpayer any more. My husband’s tax-free allowance covers the net income on the property virtually every year.
We’re not looking to sell for the next few years but may do so in the future. Is it worth our while making this transfer and what are the likely costs and consequences?
Yes, putting the property back into joint names or to ‘tenants in common’, owning 50% each as opposed to owning it in joint names, is a good idea because gifts between spouses are exempt from CGT. When you do sell the property, you will be able to offset your husband’s and your own annual CGT allowances (£12,000 each in 2019/2020) against the sale proceeds.
You could possibly inform the Land Registry of your intentions without incurring any legal costs, but I’d suggest that you speak to a solicitor to make sure that everything is handled properly.
While you are there, this would be a great time to review your wills to ensure that should you die before selling the property, your intentions of how it should be passed on are clear.
If you split the tenancy into a 50/50 (or other) percentage ownership, this also means that on the first death you could pass on the deceased partner’s share of the property to someone other than the surviving partner. Depending on your circumstances, this can be really helpful for IHT planning.
Owning the property in different percentages can also be helpful for income tax planning while the property is rented. This is because you can assign more income to a lower earner and potentially save some income tax legitimately.
While I wouldn’t expect this work to be more than a few hundred pounds, do get some quotes from a few solicitors and read their reviews before you make your decision on who to use.