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  • Tax

    Declaration of bare trust for tax planning

    Hi,

    I own a buy-to-let property with mortgage in my sole name. I'm a 40% taxpayer and my wife doesn't have income. I would like to write a declaration of bare trust to transfer the beneficial ownership to my wife to use her tax allowance, but I will remain the sole legal owner on the title.

    1. Is a declaration of bare trust (something like “I declare that I hold the property described as XXXXX for my wife absolutely” ) written by me sufficient for tax planning purposes?
    2. If so, as there is mortgage involved and I'm not transferring mortgage, how will the capital gain be calculated when selling? I understand that she'll be responsible for the CGT, but I paid the deposit originally. So, is her gain on the sale = propertyPriceOnSale - deposit - outstandingMortgage or =  propertyPriceOnSale - outstandingMortgage or what?

                The CGT amount is important for me to decide if the trust is worth pursuing.

    1. If all is well, do I just provide the declaration to HMRC as evidence now or wait for them to request it when my wife is filing her tax return?

    Thanks in advance!

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    hi

    am not tax advisor  - so pls do your diligent s

    there will be no cgt between spouses.

    there will be stld on the mortgage amount if you were to transfer shares on to your wife's name.

    once deed of trust is completed - takes about a week and £250.

    then you need to get an accountant to prepare form 17 £100. form 17 needs to be sent to hmrc within 60days..

    remember tenants in common not joint tenants..

    hope this helps

    pls do your your search..

    regards

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    Thanks for the reply!

    Mortgage will remain with me, so do we still pay sdlt on the mortgage amount?

    Note that I wish to remain the sole legal owner, so I think "tenants in common" won't apply. Is it doable?

    Also, I just learnt that for HMRC, apart from declaration of trust, usually the rental income needs to be paid into my wife's account directly. This will cause problems when re-mortgaging (BTL) as usually part of the criteria is that the rental income needs to cover the cost of mortgage interest by, e.g., 125%. Not sure how I can get around that?

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