My wife and I live in a property in Burnley, which is in my sole name and is our main residence. I am purchasing a new property in Manchester, which will become our new main residence and the current property will become our let-to-buy property, and the mortgage and ownership will remain in my sole name. The new property will be my second property for stamp duty land tax (SDLT) purposes and will, therefore, attract the higher or surcharge rate. My questions are as follows:
(1) Is there any way I can avoid the additional SDLT, i.e., by transferring the current property to a limited company? (2) What is the position regarding SDLT for the property transfer into a limited company; will it be normal rates or higher rate SDLT? (3) Will it make a difference if the new property is in my wife’s sole name and the mortgage is in our joint names? (4) I am a higher rate taxpayer and my wife is a basic rate taxpayer. How can I make the let-to-buy property tax-efficient – can I split the rental income with my wife even though the property is in my sole name? Do I need to transfer the property into joint names and register the split? (5) Finally, what paperwork or documents do I need to register with HMRC to do this split?
Arthur Weller replies:
(1) If you transfer your current property to a limited company, you will not have to pay the extra 3% SDLT when you purchase the proposed second property. (2) When you transfer your current property to the limited company, the company will have to pay the extra 3% SDLT. (3) It will not make a difference if the new property is in your wife's sole name because a husband and wife are treated as a single entity for the purpose of these rules (see here). (4) You could: (a) put the house in joint names and register the split at the Land Registry – this will result in the rental income being received and taxed 50:50; or (b) retain the property in your sole name, but transfer beneficial ownership of any percentage you wish, by means of a declaration of trust, see here. (5) If you do either of the two options just mentioned, you do not need to register anything with HMRC besides declaring the rental income. If you put the property into joint names but want a different split to 50:50, you will need to change the beneficial ownership and submit Form 17 to HMRC within 60 days.
