Shared Ownership: 99:1 ownership

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    Shared Ownership: 99:1 ownership

    Hi - A few years ago I bought a place on my own (Property A). Since purchase I have got married and we now own another property (Property B which we as a family live in and we own jointly). I still own Property A 100% and rent it out.

    As my wife is in a basic tax payer I wish to change the ownership per HRMI guidelines to 99:1 (99% me, 1% my wife) for obvious tax reasons. I've looked around but I can not understand what exactly I need to do to formally reflect my desired 99:1 ownership . Is this something I need to instruct the the Mortgage company/mortgage broker to do or is it this something that I need to take up with a conveyancer/Property Solicitor (and can you recommend any) as I m getting conflicting messages.

    In addition, if I come to sell the property do both me and my wife get 2 full Capital gains Taxes allowances (we have no other capital tax generating assets) or is it split per the 99:1 ratio?

    Thank you in advance

    #2
    If you already own 100% of property A , why do you want to change to 99% you + 1% wife ?

    If you are paying 40% tax rate and your wife is paying 20% tax rate , do you want the rental income 99% paid to wife and 1% paid to you ?

    Comment


      #3
      I am dealing with a similar situation so I can quote exactly what has been communicated by the solicitor. , as you are intending to add your wife onto the title deeds and mortgage , you need to be aware that there is a stamp duty implication relating to her having a 50% share of the mortgage irrespective of the 1% share of rental income. Many people forget that whilst they may have jummped through the HMRC hurdles the fact is that as a joint mortgagor they have 100% liability in terms of ensuring the mortgage is paid.

      Speak with your solicitor but certainly you will require your wife to be assessed by your lender for inclusion in the mortgage.

      Comment


        #4
        Thank you for the responses.

        Gordon-by changing the ownership to 99:1 when selling the property you get a capital allowance for me and another one for my wife therefore reducing tax liability.

        loanarranger- There is no stamp duty as it's 1%to my wife and allowable by the tax inspector (I couldn't give 1% to anyone other than my wife and I can't give more than 1% to my wife. It's like a marriage reward. (My concern is if my wife only gets 1% of the CGT allowance then it's not really worth it).

        I'm not too concerned about the rental tax element but believe it's 50:50 as long as you don't sign a particular form). My issue is actually getting it processed. I will continue to pay 100% of the mortgage though I do understand that if my wife technically has 1% them the mortgage company would be interested in her

        Comment


          #5
          Your wife would be taxed on 1% of the capital gain from when she acquired ownership, so she would have an annual allowance, but the gain may not use all of it.

          Your lender almost certainly won't want you / let you change the ownership without adding your wife to the mortgage (you're giving away some of the property the loan is secured against - which could make a repossession virtually unmanageable).

          If your wife joins the mortgage, she's viewed as paying 1/2 of the mortgage value for her 1% ownership, so SDLT is due based on that amount.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6
            Thanks JP for your endorsement of the implications on SDLT relating to the mortgage, I thought I had made that clear following clear advice from a solicitor to whom I recommended this particular client to.

            Comment


              #7
              Landforce ,

              I think your plan will not work because :

              1. The CGT free allowance = £11,300 is given to every person and any excess capital gains is taxed at 18% or 28% ( for 40% rate tax payers )

              2. If you change the share of ownership from current 100% (under your sole name ) to 99% ( you ) and 1% (wife ) and if a property sale were to give you a profit = £100K ( say.)


              a. Then the capital gains tax would be calculated :

              100% share = £100,000 less £11,300 = £ 88,700 @ 28% = £24,836 tax

              b. For shared situation :

              99% share ( you) = £99,000 less £11,300 = £88,700 @28% = £24,556 tax

              1% share ( wife ) = £1000 less £11,300 = Nil tax.

              c. For 50%/50% situation :

              50% share ( you) = £50,000 less £11,300 = £38,700 @28% = £10,836

              50% share ( wife ) = £50,000 less £11,300 =£38,700 @ 18% = £ 6,966


              The 99% (you) situation does not give much benefit.



              Comment

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