Transfer of equity on a Buy to Let – Advice Required

Transfer of equity on a Buy to Let – Advice Required

10:08 AM, 12th December 2013, About 8 years ago 14

Text Size

My wife and myself jointly own a BTL which we let out. I am a higher rate tax payer but my wife is on the 20% rate. Ideally I would like to do a transfer of equity into her name to reduce our tax on rental income.

I have contacted the mortgage company and there is no charge to do this. However I am just thinking ahead to when we sell the property. As I would no longer be on the deeds I would surely loose my CTG relief. Transfer of equity on a Buy to Let - Advice Required

I guess my question is “is it best/possible to leave a small % of the equity in my name or can I simply just do another transfer of equity back into my name when we come to sell?”

Cheers

James



Comments

by Mark Alexander

10:48 AM, 12th December 2013, About 8 years ago

Hi James

This is a relatively straight forward piece of tax planning and a decent accountant with it's own legal department should be able to organise this for you very cost effectively without having to involve your mortgage lender or solicitors.

I suspect the ownership is currently as "joint tenants". You could change the ownership to "tenants in common" which then allows you to and your wife to change the percentage of ownership to suit your tax circumstances.

Alternatively, as there is no CGT on transfers between spouses you could simply remove yourself from the mortgage and the deeds now and have your solicitor to arrange a transfer back into joint names immediately prior to completion of a sale to ensure you both qualify for your CGT annual exemption allowances.

I do recommend you to take professional advice.

My accountants could certainly advise on this - see >>> http://www.property118.com/member/?id=452
.

by Ian Ringrose

11:02 AM, 12th December 2013, About 8 years ago

If the property has every been your main home, then you need to be VERY careful before doing this as a lot of CGT may be at stake. Otherwise, given current tax rates, you are only risking a few £K of additional CGT when you come to sell and you may be able to change the ownership back before selling.

by Industry Observer

11:13 AM, 12th December 2013, About 8 years ago

I am undoubtedly being thick here and know nothing on this subject but don't you get mortgage relief at highest marginal rate?

by Mark Alexander

11:31 AM, 12th December 2013, About 8 years ago

Reply to the comment left by "Industry Observer " at "12/12/2013 - 11:13":

Yes but the question relates to the division of taxable profit which of course is after all allowable expenses have been offset against rental income.
.

by james poole

11:47 AM, 12th December 2013, About 8 years ago

Reply to the comment left by "Mark Alexander" at "12/12/2013 - 11:31":

Thanks Mark and others.

We are indeed currently joint tenants.

We did live at the property for 4 years before renting out so im guessing that "tenants in common" is definitely the best way of doing things as you suggest.

Great website by the way. Keep up the good work!

by Peter Hunter

17:51 PM, 12th December 2013, About 8 years ago

Why go to the trouble and expense of transferring ownership to reduce your income tax
contributions.

Appoint your wife as your property manager, she is able to charge what ever is required to absorb any surplus rental income and reduce your liability.

by Puzzler

10:26 AM, 15th December 2013, About 8 years ago

I just posted this on another thread, you don't need to do anything. The question is who received the income. So have your income paid into your wife’s account. She will have to do a tax return. This is advice I got directly from a Tax Inspector.

by AllanW

11:46 AM, 15th December 2013, About 8 years ago

Reply to the comment left by "Puzzler " at "15/12/2013 - 10:26":

hi Puzzler,
I'm well interested! - Can you point me at the thread.
Cheers
Allan

by Puzzler

15:50 PM, 15th December 2013, About 8 years ago

it's the one, "can I pay my wife for managing properties?" or some such. However others have said this may not fly. I need to do some more research.

by Edwin Cowper

21:52 PM, 18th December 2013, About 8 years ago

Wait a sec. If you're joint tenants, at law you each hold an undivided half share. So if one of you gives the other a notice ending the joint tenancy, you will become what is called beneficial tenants in common in equal share. In other words, you each own half. As regards any lender you both remain fully liable to it.

So you may not want to have it 50/50. In that case you need to agree something different in writing. With accountants or legal advice.

If you have any property/money at all you are best to have a will. But if you have properties held as tenants in common you DEFINITELY should have a will. Ask a good lawyer why.

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

BECOME A MEMBER