Signing half a BTL to my partner (who doesnt work) for tax benefitd

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Signing half a BTL to my partner (who doesnt work) for tax benefitd

    Hi all,

    Always great info on this forum

    So I own a BTL, completely in my name.

    My partner (we're not married) doesn't earn (she's a full time mum), and doesn't take advantage of her tax free allowance at all.
    I'm in the 40% tax bracket.

    If I gifted half of the BTL to my partner, we'd then own 50:50 and she'd take half the rental income. Her half would be under £10k a year so tax free, whereas I currently pay 40% on it.
    So it could be a big tax saving.

    What steps/downsides/costs are there in doing this please? The 2yr mortgage term I signed up for has lapsed, so I'm just on the standard variable rate (which is fantastic, so I wouldn't want to lose that ideally)

    Would we be liable to increased capital gains if we sold the place in say 5 years time?

    Can I simply phone my mortgage people and add her name to the mortgage? I assume not....

    Many thanks

    #2
    Can I please respond to the final question you have raised.

    For a lender to agree to allow for the transfer of equity and the mortgage to be converted into joint names they will need to underwrite your partner as she will have a liability in meeting the mortgage payments in the unfortunate event that circumstances preclude you from making the repayment so it is not an automatic Yes. I would suggest that you visit the lender , if they have an office locally, in order that you can explain why you are wanting to transfer a significant percentage of the equity.( I did post a comprehensive response from one of my solicitors following a similar question of transferring equity)

    If approval is granted then there will be a need to engage a solicitor to undertake the processes of the transfer including the registration of your partners involvement on the Title Deeds.

    The next question is the possibility that you will have to pay SDLT if the share to your partner is more than £40000, again your solicitor should advise you what amount you could be liable for and at that point you might want to reconsider your strategy

    I can see the logic of maximising your partners personal tax allowance by transferring a significant share but in my honest opinion the negatives might outrun the benefits, but before you reach for the scotch, speak with your lender and certainly the solicitor.

    Comment


      #3
      You really need to work out what all the pro's and cons are.

      If the current mortgage is more than £80,000 and your partner already owns or is named on the deeds of another property, the gifting of half of the mortgage value will attract stamp duty at 3% above the normal rates.

      Comment


        #4
        Marry your partner and make an honest woman of her, then pay your taxes honestly. Tax evasion is not the way to go.

        Comment


          #5
          Originally posted by calm-on-the-surface View Post
          Marry your partner and make an honest woman of her, then pay your taxes honestly. Tax evasion is not the way to go.
          Who said anything about tax evasion? I'm asking about minimising my tax legally. Funny.

          Thanks all for the info

          She does own half our main house, and the mortgage remaining on the BTL is over £80k, so she'd be liable for 3% stamp duty which would be around£2.5k..... I hadn't thought of that.

          Sounds like it's not worth doing. We may as well buy another BTL together and benefit that way. She's already considering becoming my letting agent as she's already doing most of the leg work, which will have its benefits.

          Many thanks

          Comment


            #6
            an option is for you to hire her as a manager for the property or pay her some compensation for time spent monitoring or maintaing the proeprty. Of course this is open to abuse and HMRC do keep an eye on these. You would have to do it fairly - ie according to market value of what she actually puts in.

            In that way, her "costs" are tax deductable to you as well as utilises her tax position.

            Comment


              #7
              many thanks

              yes we've been discussing this as she does a lot of it anyway, so might as well do the lot and I pay her (just a in a separate thread a few posts down)

              Comment


                #8
                Why do you want to give away half your property, for free, for no payment ?

                Lets assume you paid £ 100,000 for the BTL. So why give someone £ 50,000 -- for nothing ?

                If you ever split up, and 30/40% of couples do, she can make to sell the BTL and give her half the sale price.
                Not a situation I would entertain.

                Comment


                  #9
                  Ahh we're happy you see

                  Comment


                    #10
                    Originally posted by bhodgkiss View Post
                    Ahh, we're happy, you see
                    Not married, not earning, wants half your property on top of the half she already has.

                    No, don't go there.

                    Comment


                      #11
                      I go along with Ram , seems the old sayings may be apt in this instance Love is blind and there's no fool like an old fool. Keep your hard earned assets to yourself for protection for the future.

                      Comment


                        #12
                        Sorry we are changing the subject, but we try to help.
                        Some of us "care", and future capital is all our aims, saving money, as well as helping landlord and tenants.

                        Think on this for the future.
                        Partner or wife is given for free, half your main house and BTL.
                        You separate ( it happens all the time even in the most loving relationships.)
                        You to have to give, in cash, half the price of the main house to the wife, but wife insists she must continue to have what you gave her, and has been accustomed to in the relationship.

                        This means therefore must live in your house, and you can't. She may well secure your house to live in, via the courts, as she has children to house, and no job, and it has happened !
                        You have to continue to pay the mortgage, cannot sell the house to give her half the money, cannot live there, so you have to find the money.

                        She will also have claim to half the BTL, and you will have to sell it to give her half, or find more cash.
                        The bottom line is you end up with nothing.
                        No BTL and no home, sleeping under a bridge and paying mortgage and child support.

                        The above consideration is more important than your original question.

                        Comment


                          #13
                          Well, I appreciate your input. So many thanks

                          Comment


                            #14
                            Originally posted by bhodgkiss View Post
                            Who said anything about tax evasion? I'm asking about minimising my tax legally. Funny.

                            Thanks all for the info

                            She does own half our main house, and the mortgage remaining on the BTL is over £80k, so she'd be liable for 3% stamp duty which would be around£2.5k..... I hadn't thought of that.

                            Sounds like it's not worth doing. We may as well buy another BTL together and benefit that way. She's already considering becoming my letting agent as she's already doing most of the leg work, which will have its benefits.

                            Many thanks
                            Setting out to minimise tax liability by doing something that serves no other purpose except to pay less tax is avoidance and/or evasion. It is not fair nor right, despite what the neoliberals may say.

                            Comment


                              #15
                              There's a big difference between tax avoidance and tax evasion.
                              One's illegal and one is legal for a start.

                              If you run a business with shareholders who want maximum profits and dividends, you have a duty to maximise profits and dividends, which means paying the least tax possible.
                              Amazon and Google pretty much told parliament as much when they were asked to explain their tax evasion policies.

                              There's no reason a self employed person should pay a penny more tax than they should.
                              As a citizen, you should make sure you don't pay any less than you should either.

                              Anyone who thinks that it's somehow wrong to minimise the tax they pay can simply help out by ignoring their personal tax free income tax allowance, and not claiming business expenses as allowance against tax.
                              That way they can avoid any guilt they feel using legitimate measures to make sure the tax they pay is correct.
                              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

                              Latest Activity

                              Collapse

                              • Reply to Caught out by changes to Capital Gains Tax
                                by reluctantlandlord1976
                                Hi Andrew
                                First of all I've got an initial appointment to speak to an accountant on Friday!

                                Can I just check where you write ' ...at death 1/6th of the value of the whole would have been deemed to pass to you for CGT purposes as the survivors would share the whole'.

                                Does...
                                08-12-2021, 18:02 PM
                              • Reply to Caught out by changes to Capital Gains Tax
                                by jpkeates
                                Even if probate wasn't mandatory, it would probably have been useful.
                                08-12-2021, 13:44 PM
                              • Caught out by changes to Capital Gains Tax
                                by reluctantlandlord1976
                                I appreciate 'ignorance' is no excuse, however there are some mitigating factors, i.e. due to illness etc.

                                1. Previous family home rented out - terrible tenants - left owing rent, bad repairs etc. [usual story for some] subsequently property not let for 2 years for a number of reasons while...
                                06-12-2021, 13:51 PM
                              • Reply to Caught out by changes to Capital Gains Tax
                                by AndrewDod
                                Yes this would be the case if it was jointly owned (not as tenants in common). The situation would be that at death 1/6th of the value of the whole would have been deemed to pass to you (for CGT purposes), as the survivors would share the whole.

                                So for the 3 periods you would be taken...
                                08-12-2021, 12:51 PM
                              • Reply to Caught out by changes to Capital Gains Tax
                                by reluctantlandlord1976
                                jpkeates
                                There was no estate as such, property jointly owned - they were both retired at time of purchase living on small pensions, hence I bought with them so they could stay in the home they'd been renting from council from early 1950s to March 1982 at time of purchase. And I paid for the initial...
                                08-12-2021, 10:50 AM
                              • Reply to Caught out by changes to Capital Gains Tax
                                by jpkeates
                                I don't know the historic thresholds, but it's bizarre that there's no probate for both of your parents, their estate has to be tiny for that to be possible nowadays.
                                It's probably too late for HMRC to do anything about that, but that process sets the values for CGT calculations later on, so it's...
                                08-12-2021, 10:28 AM
                              • Reply to Caught out by changes to Capital Gains Tax
                                by reluctantlandlord1976
                                Morning Andrew
                                Thanks for your response early this morning and clarifying I have to make three separate calculations [the split wasn't clear on the CGT calculator].
                                I understand the query on the value but this is an ex council house on a council estate [I feel I have to defend it here as...
                                08-12-2021, 08:45 AM
                              • Reply to Caught out by changes to Capital Gains Tax
                                by AndrewDod
                                As gordon indicates you need to consider it in three entirely separate parts, each have their own gain and calculation --

                                The part YOU owned before Death 1
                                The part YOU owned between Death 1 and Death 2
                                The part you owned after Death 2

                                Based on the values you give...
                                08-12-2021, 05:52 AM
                              • Reply to Caught out by changes to Capital Gains Tax
                                by reluctantlandlord1976
                                Thank you Gordon, didn't see your response this afternoon. I will look at this with fresh eyes tomorrow as it's late now.
                                I've put some figures in my reply to a post just now but answers below to your questions.

                                a] £80k Jan 2021 sale price.
                                b] As property purchased before...
                                08-12-2021, 00:55 AM
                              • Reply to Caught out by changes to Capital Gains Tax
                                by reluctantlandlord1976
                                Andrew, apologies only just seen your post [was it awaiting approval did you say?] answers are:

                                Purchased March 1982 as joint tenancy - so equal split of 33 1/3% each party
                                Parent 2 died September 2007 - as joint tenancy I inherited their share - so at this point I own 100% of property...
                                08-12-2021, 00:41 AM
                              Working...
                              X