If you own a property or land and are thinking of transferring it – or a share in it – it’s important to know what a transfer of equity is, and what it involves. Let’s look at some common FAQs.
1. What is a transfer of equity
A transfer of equity occurs when a property owner (or land owner) wants to transfer ownership of that asset to another person, whether in full or partially, as a share.
2. Are there tax implications?
Yes, depending on your tax status, the situation of the transfer, and the status of the recipient, there may be Stamp Duty Land Tax obligations. Stamp Duty Land Tax is paid to HMRC when you buy a property. Some people are exempt, for example, first-time buyers up to certain threshold limits across the UK and within London. London has a higher threshold limit for stamp duty for first-time buyers because the price of a property in the Capital is far higher than across the rest of the UK.
3. Who can receive a transfer of property?
A transfer of equity can be made by the owner to anyone. It could be to a child, a grandchild, a spouse or a partner. A transfer of equity solicitor can provide further information in this regard. Property law is a complex area, and equity transfers are no exception. If they are not carried out correctly and within the law, they can be legally challenged at a later date, or the transfer may attract more tax than if it were carried out correctly by a transfer of equity solicitor.
4. Why do people carry out transfers of equity?
People carry them out for a variety of reasons. An individual might meet a new partner and wish to add them to the title deeds. The property owner might want to organise their estate for tax planning reasons, or for distribution of an estate within a will. A property owner might want to find a tax-efficient way to pass a property to a child or grandchild.
5. Can a property owner transfer the equity themselves?
It is best to use a transfer of equity solicitor to ensure the paperwork is carried out correctly and to ensure the correct calculations are made to make a tax-efficient decision.
6. How do you know how much SDLT is due?
This will depend on your marital and tax status, amongst other things. A solicitor can help you to calculate how much tax is due and help you to put the right paperwork in place to ensure the transfer is legal. This is vital because a poor calculation can mean that you are later chased for tax – with the risk of penalty payments. Furthermore, if the necessary legal paperwork isn’t completed for the transfer, it can later be challenged in court.
In conclusion, the use of a specialist solicitor can be invaluable when seeking to transfer equity, to ensure the process is completed correctly and according to the law.