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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 40 years experience as a qualified accountant (UK based Practitioner)
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I currently live in a buy-to-let flat in my mother's name. I

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Hello, I currently live in a buy-to-let flat in my mother's name. I pay off the mortgage and we were wondering if we were to add my name to the lease is that helpful from a capital gains perspective when we eventually sell ( in about 3-5 years). I've been reading up about Stamp Duty and Gifts but it's a little confusing as to what fees we would end up paying if I'm added to ownership.
JA: What are the assets or property for this capital gain?
Customer: A two bedroom flat in London
JA: Anything else you want the Accountant to know before I connect you?
Customer: No thanks!

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.
Many thanks

Customer: replied 4 months ago.
The current 5 year mortgage is up for renewal in October so we were wondering if it makes sense to add me before that
Customer: replied 4 months ago.
Sorry I should also say there's 20 years remainng on the mortgage!
Customer: replied 4 months ago.
Property value is around £410,000, we bought for £305,000 5 years ago

Thank you for your question.

As the property in question is your mother's second home (investment property) any transfer of ownership to you would trigger a chargeable transaction for CGT purposes. The transfer would have to be reported at market value albeit no money changes hand. Based on the figures there is a capital gain of around £105,000. If your mother was give you 50% ownership, there is a gain of £52,500 less gains allowance chargeable to CGT. you are talking of atleast (40,000 x 18%) £7,200.

Also there would be stamp duty payable as there is a mortgage in place.

More information on SDLT on transfer of property can be found here (look at "you are given property as a gift"

https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#if-you-transfer-or-divide-up-jointly-owned-property-or-land-unmarried-couples-and-other-joint-owners

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 4 months ago.
Thank you for clarifying. Just so I'm sure, it seems like we would save money by continuing with the flat in my mother's name and her gifting to me after the sale, are there any financial advantages to me putting my name on the ownership? Providing she lives a further 7 years, this wouldn't require any inheritance tax?

Thank you for your reply.

If it is your intention to live in the flat for medium/long term then there is financial advantage in the sense you would be able to claim private residence relief on your share of the gain when you eventually sell the flat.

You may find it is better to leave you out on the title to avoid immediate outgoings to cover CGT and SDLT.

I hope this is helpfuland answers your question.

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Customer: replied 4 months ago.
Ok, thank you!

I thank you for accepting my answer.

Best wishes.