How should I own my property?

How should I own my property?

12:12 PM, 9th May 2014, About 10 years ago 13

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I own one BTL property in my sole name. I am currently a non-tax payer and my husband is a higher rate tax payer.
We are shortly to complete on a second BTL property, funded by an interest only BTL mortgage in joint names (my income is not sufficient to have the mortgage in my sole name). How should I own my property?

I am a new landlord and would much appreciate any advice on the following:

1. Would you recommend we own the property as tenants-in-common? I understand we can specify our % ownership (e.g. 90:10) and we would be taxed on this basis.

2. How do you do this ? I have read about a form 17 declaration and also a Form A restriction (help!)

3. Using the example of a 90:10 ownership, will I be able to offset mortgage interest against the property income in the same ratio, even though the mortgage is in joint names and we are both equally liable ?

4. I currently have 2 bank accounts: a joint one with my husband for our family expenditure and a second one in my sole name for the first BTL property. If we were tenants-in-common could all the transactions on the second BTL property go through my sole bank account or would I need to open a third bank account in joint names for this BTL ?

5. It’s a long way off, but if we were to sell the property in the future how would the capital gains tax allowances work if we owned the property 90:10 ?

6. Is there anything else I need to look out for ? I am aware I need to do a will as if I die my share of the property will not automatically pass to my husband or children.

Thank you all in advance for your help. I’m very glad to have discovered this website.

Regards

Emily Rivers


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Comments

Mark Alexander - Founder of Property118

12:18 PM, 9th May 2014, About 10 years ago

Hi Emily

The best piece of advice I can give you on this is to speak to a qualified and fully insured accountant, preferably one who is a landlord and advises several other landlords. That's what I did and I've saved far more in tax than I've ever spent on accountancy fees.

My strategy is documented here >>> http://www.property118.com/how-to-become-a-respected-profitable-landlord/60765/

It may or may not be right for you. There's a lot of reading for you there but when you consider that it's based on 25 years of experience .......

Also see our tax section (third button from the right on our main website navigation bar above).

I wish you well 🙂
.

martinB

22:54 PM, 9th May 2014, About 10 years ago

1. Tenants in common is ok but remember to make sure the will states who will get your share. I Own 10% on 1 property and just half a per cent on another. You will be taxed in ratio to the ownership agreed but when doing your self assessment form then make it clear in the notes what you have done.

2. Solicitor will sort this out for you.

3. Yes

4. Yes but easier if you have a joint account - especially on death!

5. You would be taxed on 90% of the gain and your husband 10%.

DC

16:44 PM, 10th May 2014, About 10 years ago

Also, when you do your wills I would strongly recommend that you both get advice on Lasting Power of Attorney as well.

If you are capable of completing the paperwork yourself many solicitors will check this over for you and ensure that you understand the consequences of your requirements and do this free of charge as part of your will and estate planning.

6:56 AM, 12th May 2014, About 10 years ago

Hi Emily
I would encourage you to look to the future as and avoid basing all your plans on your current tax position. If you go onto build a larger property portfolio, and it seems that you might be heading that way, some lateral thinking now could pay dividends later.
Tenants in common is definitely the right way to go but 50/50 still might be the best if tomorrow your income situations change again, then there is IHT to think about, and all sorts of life changes where anything other than 50/50 could come back and bite you on the bum.
LPAs should be a top priority, even over a Will, for every landlord, but crazily most don't have them!! There is almost certainly other strategies worth exploring but here is not the time or place, but by all means contact me for a chat.
Garry Streeter

Mark Alexander - Founder of Property118

7:26 AM, 12th May 2014, About 10 years ago

Emily

If you do splt the ownership 90/10 it is very easy to change as and when required. There is no CGT on transfer between spouses.
.

19:01 PM, 12th May 2014, About 10 years ago

Mark, you right about changing the % and the CGT, but the problems can start if one partner doesn't agree, or worse still point blank refuses! Yes you could have an external agreement covering this, but my word it can get messy!

Just a thought, as you should always have all the information to make a balanced decision.

Garry

Sarah Rivers

11:54 AM, 15th May 2014, About 10 years ago

Thanks all for your comments. They are much appreciated.

Mark - I have just had an introductory call to the tax accountants you mention on property118 and found them very helpful. So thank you. I want to make a donation. Am I best to do it via the donation link on the website or the good landlords campaign link ? Not sure if the money ends up in the same place.

Mark Alexander - Founder of Property118

11:58 AM, 15th May 2014, About 10 years ago

Reply to the comment left by "Sarah Rivers" at "15/05/2014 - 11:54":

Thank you Sarah, either/or is fine, it all ends up in the same place and is used for the same purpose.

We operate Property118 on a not-for-profit model, i.e. everything we do here is funded by donations and sponsorships.

Our mission is... "To facilitate the sharing of best practice in the UK Private Rented Sector"

Thanks in advance 🙂
.

13:04 PM, 15th May 2014, About 10 years ago

There is an aspect on the Form 17 and property ownership that is fear of being overlooked in this debate.
By declaring all or most of the rental income goes to one spouse you are also confirming to HMRC that the BENEFICIAL INTEREST rests with just one spouse. You cannot have it both ways, income and Capital go hand in hand and have to be exactly the same. If income is declared as belonging to one person then in effect you are saying that the capital is held that way too and that spouse has the full beneficial interest even if the legal title is in both names.
Don't forget property ownership has two elements: true title and beneficial interest, and it's the latter that determines who holds the cash value!

It's worth remembering all this when you deal with your Form17 lest you create a problem whilst you are trying to solve another!

Hope that helps?

Garry Streeter

Sarah Rivers

21:06 PM, 15th May 2014, About 10 years ago

Reply to the comment left by "Garry Streeter" at "15/05/2014 - 13:04":

Hi Garry
If I were to own 90% of the property and my husband 10% as tenants in common and we complete form 17 to HMRC, I thought this allows us to be taxed on the property income & costs on the same basis. Isn't title and beneficial interest then the same ? Or am I missing something ?

On a separate point, my solicitor tells me its not essential to do a declaration of trust to specify ownership, it can simply be added to the purchase deed. Can anyone confirm that ?

Thanks in advance for your help.

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