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 Accounting News & Insights

Married Couples - How should property be held?

24th November 2014

Where a let property is held by one spouse, a transfer into joint ownership can help save income tax on the rental income where one spouse pays tax at a lower marginal rate.  Holding property in joint names may also mitigate the capital gains tax (CGT) charge on a future sale of the property.

In England and Wales property can be held as:

  • Joint tenants – where the owners hold the property collectively as a whole. 
  • Tenants in common – where the owners hold identifiable interests in the property. For example, say 75% and 25% of the property.

If the owners are married or are in a civil partnership, they are deemed for tax purposes to hold the property in equal shares, i.e. 50:50.  Where a property is held in unequal shares, in order to benefit from being assessed to tax in accordance with the actual beneficial ownership, a valid election (on a Form 17) needs to be filed with HM Revenue & Customs.

If a property is held as joint tenants, it is quite simple to sever the joint tenancy and switch to tenants in common.  There could however be a Stamp Duty Land Tax charge where the property concerned is mortgaged.

A ‘gift’ of an interest in a property between spouses or civil partners who are living together is treated as a ‘no gain no loss’ disposal for CGT purposes.  The donee is effectively treated as acquiring the interest in the property at the donor’s base cost.

The transfer between spouses/civil partners is also exempt from inheritance tax, unless one spouse is non-UK domiciled.  


Accounting News & Insights

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Married Couples - How should property be held?

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