How to transfer equity in a property between you and your spouse.
Transferring equity is the legal term for the process when an existing owner of a property (or land) adds or removes one or more other people to the ownership of a property.
The following guide explains what you need to be aware of when transferring equity in a home between spouses or civil partners.
See also:
Get a transfer of equity conveyancing quote
Why might equity be transferred to a spouse?
You might decide to transfer equity in your home when:
You want to add a new wife, husband or civil partner to the deeds of your home
Transferring equity to a husband, wife or civil partner is a common undertaking.
If you get married, remarried or enter into a civil partnership, you may both want to merge your financial affairs and share the ownership of your home with your spouse.
You may decide to transfer equity as an outright gift - where no money changes hands, or one partner may pay for the equity.
Separating from a partner or spouse
If you are getting divorced or dissolving a civil partnership, and you own a property together, one partner may decide to buy the other partner out.
Transferring equity does not necessarily mean that any money will change hands. Divorcing or separating couples might decide to exchange equity for other assets, such as other properties owned or cars.
An ex-spouse might even agree to be removed from the property deeds for no consideration (payment) at all.
Tax planning
Partners who are not married or in a civil partnership may have to pay Inheritance Tax (IHT) if their partner dies. Adding a partner to the title of the property can ensure that the property passes to the surviving partner and there will be no IHT.
If a spouse or civil partner were to die, the surviving partner would not have to pay IHT. However, the process is often easier if the property is owned by both spouses, so it may still be a good idea to co-own the property as joint tenants.
What is the process of transferring equity between spouses?
Transferring equity in a home is often a relatively simple undertaking. If there is no mortgage in place, or no new mortgage being entered into at the point of transfer, you could technically complete the transfer without the help of a conveyancing solicitor.
Even when no money is changing hands, equity transfers can get complicated, especially when there are Stamp Duty (SDLT), Capital Gains Tax (CGT) and Inheritance Tax (IHT) considerations.
A conveyancing solicitor can complete the transfer of equity and ensure that you are both legally protected.
When transferring equity, your solicitor will:
- Review the title documents (deeds)
- Prepare and complete the necessary legal documents and the transfer deed
- Seek and obtain the consent of the mortgage lender and freeholder (where applicable)
- Register the Deed of Transfer (TR1 Form) at HM Land Registry (HMLR)
- Complete and file the Stamp Duty return form.
Read more:
A step-by-step DIY guide to transferring equity in a property
How do I transfer equity in a property with a mortgage
Will there be any Stamp Duty to pay when transferring equity to a spouse?
When transferring equity in a home, other property or land, Stamp Duty Land Tax (SDLT) would need to be paid on the 'chargeable consideration'.
If you buy a property outright, the property purchase price is the chargeable consideration. When transferring equity, the chargeable consideration is the amount of the mortgage being transferred or taken on, plus the amount being paid for the equity.
If the chargeable consideration exceeds the threshold, Stamp Duty may be payable.
Your conveyancing solicitor will advise you on Stamp Duty as part of the conveyancing process.
Getting married or entering into a civil partnership
Stamp Duty might be payable when transferring equity to a spouse or civil partner if the chargeable consideration exceeds the Stamp Duty threshold.
Divorcing or dissolving civil partnership
If you receive a property or share in a property as part of a court order or divorce agreement, or if you are dissolving a civil partnership or annulling a marriage, Stamp Duty would not usually be payable.
What if I am separating from a partner, and I am not married or in a civil partnership?
If you are transferring equity when separating from a partner, and you are not married or in a civil partnership, SDLT is payable on the chargeable consideration.
Read more:
What about Capital Gains Tax?
If you gift a property to a civil partner or spouse and the property is not your main residence, there may be Capital Gains Tax (CGT) implications.
Capital gains tax could apply if for buy to let properties, holiday homes or any other property that is not the main residence. Capital Gains Tax is a complicated area, however. CGT rules include numerous exceptions and exemptions. It is recommended that you seek professional advice from a tax specialist or accountant.
Read more:
Do I have to pay Capital Gains Tax (CGT) on a transfer of equity?
