Does property transfer have tax implications?
The tax implications of an equity transfer depend on the nature of the transfer. There’s currently no capital gains tax (CGT) charged on transfers to your spouse, civil partner, or a charity.
However, transfers to anyone else, including children, are subject to CGT. You get an annual exemption of £11,000, and anything beyond that will be charged at 18% or 28%. The specific rate depends on whether you’re a basic or higher rate taxpayer, as well as the size of the gain.
To reduce the CGT, consider transferring the property, or a share of it, into your spouse’s name to utilize two annual allowances and potentially minimize the CGT. For instance, this strategy can be beneficial if you are planning to transfer property to a child.
Your conveyancer can provide you with detailed guidance tailored to your situation.
Inheritance tax (IHT) considerations
A transfer of equity can also be treated as a potentially exempt transfer (PET) for inheritance tax (IHT) purposes. If the value of the transferred property exceeds £325,000, the liability reduces gradually over seven years. After this period, the property would no longer form part of your estate for IHT calculations.
By understanding these tax implications, you can make more informed decisions about transferring property and potentially reduce your tax liabilities.
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