BTL property, wife's property or both our property?

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    BTL property, wife's property or both our property?

    Hello,

    First off appologies for joining and going straight in with a question. I promise i will try my best to positively contribute in the future.

    My wife and i are in the process of remortging our home as a BTL and purchasing a new home to live in. The BTL is in my wife's name. I am the major earner and next year i will probably earn just over 50k. My wife only earns a few k. Will it be better for tax purposes to leave the house which is to become a BTL in her name or add my name to the mortgage as well?

    Many thanks in advance for any replies. Appologies for my ignorance we are newbies!

    #2
    Be aware of sdlt which is charged at extra 3% if the property buyer already has an existing property registered under his/her name.

    Comment


      #3
      Thanks Gordon, yep we are aware of that. I was thinking about the amount of tax we would oay going forwards and whether I would pay a lot more due to my extra earnings if my name was on the BTL.

      Comment


        #4
        Would your wife be able to get the mortgage in just her name?

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          #5
          We are in the process of sorting out mortgages now. The broker has given us the option of continuing in her name (but changing it to BTL) or adding my name so I assume she can.

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            #6
            If your wife has the property in her name only and is the only mortgagee, she could receive all of the rental income and offset all of the interest cost against the income.
            And, from the sound of it, pay basic rate tax.

            If you receive income and are on the mortgage, you'll be taxed at the higher rate and will only be able to offset your half of the interest at the basic rate of tax.
            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


              #7
              I would remortgage the property as a joint mortgage. Depending on your wife's income it might open up more lenders. It is not clear how much LTV etc..

              Make sure your solicitor registers you as "Tenants In Common".

              Then, set up a declaration of trust to split the % of ownership. Complete Form 17 to HMRC to register the split. This split can be anything, so you will need to work out what keeps you in the lower tax bracket. For example a 99:1 split in favour of wife.

              You can then use your property allowance to offset your rental income. Keep YOUR income below £1K. Your share of the costs will also be at the same percentage.

              Make sure your wills are up to date as tenants in common is not the same as Joint Tenancy.



              Simple to set up.


              n.b. I am assuming you are also getting a mortgage for the New HOME?? if not, then you have other options available.

              Comment


                #8
                Pretty much what OneSmallStep said.

                We have a 90:10 share on our buy to let but the mortgage is joint. In that we are both 100 % liable should the other just "do a flite be nite"
                basically I pay no tax on my share as it's below the allowance. Wife pays at basic rate.

                My accountant suggested a 50:50 split on our second home (I will live in it during the week due to work being 2 hours from our first home. ) he suggested that because we intend to rent out a room to offset the costs and we'd have to split the £7500 tax free rent a room.allowance. and it given the market rate is about £425 a month, a 90:10 split would have one of us paying a little tax.

                Comment


                  #9
                  In this particular case, what is the benefit of being joint owners with a 90:10 or 99:1 split over the wife having total ownership.
                  Any split in ownership means that the OP has some income (which is going to be taxed at the higher rate) and can only offset the available portion of the mortgage interest at the basic rate.

                  It seems less tax efficient (and more paperwork), even though the increase in the amount of tax paid may be small.
                  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


                    #10
                    You also need to weigh up the costs of SDLT. If your wife owns one and you own the other, no 3% surcharge to pay.

                    Comment


                      #11
                      Doesn't work like that.
                      Married couples are considered as a single person for the purposes of the surcharge.
                      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


                        #12
                        jpkeates,

                        That's just mean! He may get stung twice then. He's going to get hit with 3% buying a new family home and then get hit again if he goes half on the BTL.

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                          #13
                          Landlords are easy to tax, no one likes us.

                          It is anti-marriage though, which is usually a bad look in politics.
                          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


                            #14
                            Originally posted by jpkeates View Post
                            In this particular case, what is the benefit of being joint owners with a 90:10 or 99:1 split over the wife having total ownership.
                            Any split in ownership means that the OP has some income (which is going to be taxed at the higher rate) and can only offset the available portion of the mortgage interest at the basic rate.

                            It seems less tax efficient (and more paperwork), even though the increase in the amount of tax paid may be small.
                            If they are set up as 'joint owners' it could give them more flexibility in the future. Retirement planning, change in job status etc.. also, it could open more doors for mortgage products. The question I would be more inclined to ask is what are the disadvantages of being joint owners?? as I can't see any.

                            The OP will not be liable for tax if they use their property allowance. As it is only a single property, then I am assuming that his property earnings will be a lot less than the allowance. They will SAVE tax, although without more info then difficult to give an exact figure. Only 1% of the mortgage would not have the full relief. The amount might not be much but I think for future planning it will give them more flexibility.

                            I fully agree with you that no one likes us.

                            Comment


                              #15
                              There aren't necessarily disadvantages implicit in being tenants in common.
                              But issues can arise if the marriage ends, or there's a disagreement about what should be done with the property that don't arise with one person owning it.
                              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

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