Tax advice

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    Tax advice

    Hi - apologies if this is not the sort of question this forum can answer...

    I am a new landlord and am renting out a house that we previously lived in and took out a re-mortgage on. The mortgage is in joint names. I am a high rate tax payer and my wife is in the bottom bracket of tax.

    Would it be better to put the mortgage in my wife's sole name and for her to become the landlord? If we leave it as it is, will my wife also need to declare income on self assessment? If so, how is the income aportioned? Any help would be gratefully received!

    Thanks

    #2
    The income is apportioned 50/50 by defualt if you are married. However A Declaration of Trust apportioning the beneficial interest can alter this to anyhting to 99 to 1 and report this to HMRC or Form 17. Use a Solicitor to do this. Do not transfer the ownership to a sole name as you will loose up to £40,000 of Letting Relief and your spouses capital gain allowance on disposal. Read HS283 on the HMRC web site

    Comment


      #3
      Thanks Pete - very much appreciated and thanks for the prompt response!

      Comment


        #4
        Originally posted by TaxationPete View Post
        The income is apportioned 50/50 by defualt if you are married. However A Declaration of Trust apportioning the beneficial interest can alter this to anyhting to 99 to 1 and report this to HMRC or Form 17. Use a Solicitor to do this. Do not transfer the ownership to a sole name as you will loose up to £40,000 of Letting Relief and your spouses capital gain allowance on disposal. Read HS283 on the HMRC web site
        Just out of interest, with this sort of 99/1 husband and wife set up, is it likely to cause a problem with mortgage lenders bearing in mind the joint mortgage? Not sure why it might - other than an uneasy feeling about ending up with the situation where one person has a mortgage liability many times greater than the value of their interest in the property and share of rents.

        Comment


          #5
          Originally posted by Mr Green View Post
          Not sure why it might - other than an uneasy feeling about ending up with the situation where one person has a mortgage liability many times greater than the value of their interest in the property and share of rents.
          I agree. Under the terms of the mortgage, the borrower is likely to need the mortgagee's consent in order to achieve this. Without this consent there is a breach, and I believe the courts would have the power to set aside the gift. Which IMO begs the question as to whether the gift was ever made...

          ING's terms and conditions at http://www.ingdirect.co.uk/home/tandc/england_wales.pdf state: 1.3 (g) You must not give any person rights or create another mortgage over the property, or let or part with possession of the property or any part of it, without our prior written consent.

          Comment


            #6
            Originally posted by Telometer View Post
            1.3 (g) You must not give any person rights or create another mortgage over the property, or let or part with possession of the property or any part of it, without our prior written consent.
            Surely that applies to the case of introducing a completely new third party (be that a spouse or not) as co-owner; if two individuals have applied for and been granted a mortgage together, on reading that clause I really don't see it covering a situation whereby the relative proportions of ownership of the original two mortgage holders gets varied.

            Comment


              #7
              Disagree. Look at the definitions.

              You, your, yourself The person (or people) named in the mortgage deed as the borrower. If there is more than
              one borrower, ‘you’, ‘your’ and ‘yourself’ refer to each borrower jointly and individually.
              They will also refer to anyone who takes over your legal rights or duties (for example, a
              personal representative the property passes to if you die)

              Comment


                #8
                Originally posted by Telometer View Post
                Disagree. Look at the definitions.
                So I guess it depends on whether gifting a portion of an already jointly-owned property between a husband and wife consititutes 'giving rights" over the property? I would say not, as they both already have rights over it... anyway, I think it's pretty self-evident that the intent of the clause in question is to prevent someone (eg) flogging off a mortgaged property to a third party; I don't believe the lender would be concerned about varying the ownership proportions, and that if they were, the T&Cs would be made unequivocal on the subject.

                Finally - I can assure you that the last time I applied for a mortgage - jointly with my wife - there was nothing on the application form at all about % ownership, or even whether the title would be held as joint tenants or as tenants in common. It wasn't with ING admittedly, but go figure.

                Comment


                  #9
                  A and B buy a property 50:50. A gives B rights to 100% of it. Sounds like giving rights to me (I am no lawyer).

                  Comment


                    #10
                    Originally posted by Telometer View Post
                    A and B buy a property 50:50. A gives B rights to 100% of it. Sounds like giving rights to me (I am no lawyer).
                    That would be fundamentally different to A giving B rights to 99% of it, since it's the difference between A retaining an interest in the property and not doing so (and nor am I!)

                    Comment

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