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  • Tax

    How to use tax allowances efficiently?

    Hello everyone,

    Need some advice for a buy to let.

    Married couple, I am a basic tax payer, earned income around 30K yearly and wife is a nil tax payer as no earned income. Recently moved to a rented home nearer to work and let the only property we own as Joint tenants. (got constant to let from lender). I understand the property we already let, the tax will be calculated 50:50.

    We are in the process of buying another property for buy to let. For the new BTL, I would like to pass 90% of the income to wife’s name for tax purposes as it will help reduce tax liability, help me stay well under higher rate tax threshold and also under £40K for future BTL mortgage applications. (Some lender’s calculate stress test and/or affordability differently if 1 applicant’s income is 40K or more, even under higher rate threshold)

    We would like to own the BTL as Joint tenant for future Capital Gain Tax purpose, if any. Also if 1 person dies the other gets automatically.

    We are not thinking to own as Tenancy in common with unequal share.

    So, my questions are, is it possible

    1. To own the BTL as Joint tenants and pass most income to wife’s name?
    2. To take advantage of future Capital Gain tax equally, even we shared BTL income differently?
    3. To use Declaration of Trust and form 17 in this scenario?

    Thank you in advance.

    0
    0

    Unfortunately the answer to all 3 is no.

    You can only submit form 17 and be taxed other than 50:50 if you do in fact own the property as tenants in common in a different proportion. Such ownership counts for CGT also (unless you change it before sale).

    Debbie

    2
    0

    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    If he does go TiC at 50:50 ownership, can he still assign, say, 90% to his wife as "she does all the work" and still stay legal ?

    1
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    No it would need to be 50:50 unless he can demonstrate sufficient to amount to a partnership.

    1
    0

    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    I agree with Debbie

    basically if you purchase a property together you both own 50%

    so the net Profit is 50/50

    The only way you could achieve your goal is if you Purchased your Next BTL via a Company and your wife could then draw a salary from the Company

    But the costs would be much higher and profit less.

    1
    0

    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.