Remortgaging my home for buy to let in joint ownership – tax situation

by Readers Question

10:56 AM, 19th February 2016
About 3 years ago

Remortgaging my home for buy to let in joint ownership – tax situation

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Remortgaging my home for buy to let in joint ownership – tax situation

I am remortgaging my own home (of which I have sole ownership) to buy a buy-to-let, which I am thinking of putting in joint names with the good lady (wedding in May) – as she is a 20% tax payer and I am a 40% tax payer, this offers some tax efficiency in the long run (as well as I think, twice the CGT allowance to play with when we dispose of the property?)wedding

My question is, does putting it in joint names NOT affect the way in which the mortgage interest is allowable as a deductible expense? I.e. is it immaterial that the mortgage on my home is in my name only, and that has raised funds for our joint venture…

Is the treatment simply all income, minus all expenses, divide by two (assuming 50/50 share) ?

Thanks,
Trev



Comments

Neil Patterson

11:00 AM, 19th February 2016
About 3 years ago

First of all congratulations Trev 🙂

Please see our tax page and articles on this subject which I hope you find useful:

Tax page >> http://www.property118.com/tax/

Article: Is it possible to avoid the 40% tax on rental profits? – this question was posted by a Property118 reader, you may well find the replies very useful >> http://www.property118.com/possible-avoid-40-tax-rental-payments/75158/

Under our legal advice tab: Ownership restructuring for tax purposes
>> http://buytoletconveyancing.co.uk/declaration-of-trust/

Howard Reuben CeMap CeRER

12:40 PM, 19th February 2016
About 3 years ago

... and to arrange the most suitable remortgage on your own home, you will need to speak with a regulated mortgage adviser with 'whole of market' access too.

This fella's not bad > http://www.property118.com/member/?id=314 🙂

Rick S

16:58 PM, 19th February 2016
About 3 years ago

Have you borrowed more on your residential mortgage on your own home in order to purchase the property to let outright?
If this is the case, you are unable to offset the mortgage interest against tax as the mortgage can only be on the property that is being let out in order to do this.

With regards to splitting the income re tax purposes, as joint tenants you can split 50/50. However, you may wish to be tenants in common and split differently (via a declaration of trust) but, you will need to submit the relevant HMRC Form 17 if you want to benefit as otherwise ownership will be assumed by them as 50/50 for tax purposes. There is more information on this site.

You can change the declaration of trust, even revert to joint tenants at a later stage if it is beneficial to do so. A solicitor will charge £100 + for doing this.

Gary Dully

18:39 PM, 19th February 2016
About 3 years ago

You might want to see what Clause 24 will do to both your tax positions by 2017-2020, with the downloadable spreadsheet, as it could drag your future bride into a higher tax bracket and / or increase your own tax bill.

Paul Mahoney

21:15 PM, 19th February 2016
About 3 years ago

Hi Trev
Congrats on the planned marriage, I am getting married next week myself so we're probably going through a similar mix of excitement and headache at the moment.
There are a few considerations here;
You may want to think about buying as tenants in common perhaps 99% in your partners name and 1% in your name to direct most of the income to her for tax purposes, this is worth getting tax advice on.
Perhaps more importantly is buying the right buy to let investment for your circumstances and what it is that you're hoping to achieve. Both of these areas Nova Financial can help with. If you'd like to to have a brief chat about whether we can help, get in touch by clicking my profile.

Puzzler

18:00 PM, 20th February 2016
About 3 years ago

Reply to the comment left by "Rick S" at "19/02/2016 - 16:58":

Rick, this is not the case and it has been mentioned on here before - as far as HMRC is concerned it is the purpose of the loan that makes it eligible for the relief; it does not have to be on the same property. I have had the same situation and checked into it very thoroughly at the time. What you can't do is claim the interest on the amount of the original mortgage still outstanding at the time of the remortgage as that portion was not taken out to fund your buy-to-let. If either are repayment then the capital portion is not allowable.

The OP should see an accountant.

Alison King

0:19 AM, 21st February 2016
About 3 years ago

Reply to the comment left by "Puzzler " at "20/02/2016 - 18:00":

I find that very surprising. If true it would mean someone could remortgage their family home to buy a park home which does not normally qualify for a mortgage, rent it out and claim tax relief on the loan. I didn't think that could be done.


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