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self employed and rental property....
9oaks
Posts: 14 Forumite
in Cutting tax
hello, we are in need of some advice please
we are in scotland
we have a family home in joint names and a rental in joint names.(husband and wife).
one of us is due to go pt paye at basic tax and pt self employed, pushing total income into the higher rate tax.
the other is paye at basic rate.
if the higher rate tax payer was removed from the deeds of the rental, then tax is only payable by the paye person @ basic rate----yes??
also was told that higher rate tax payer can claim say 25% ownership of the rental and so only pay higher tax on this part of the profit.????
also would there be any advantage to having the family home property in the higher rate payers name only- meaning that each person has one sole property.
or
is it worth going down the road of setting up as a ltd company??? this i need to read more about but was mentioned to me.
any advice welcome
we are in scotland
we have a family home in joint names and a rental in joint names.(husband and wife).
one of us is due to go pt paye at basic tax and pt self employed, pushing total income into the higher rate tax.
the other is paye at basic rate.
if the higher rate tax payer was removed from the deeds of the rental, then tax is only payable by the paye person @ basic rate----yes??
also was told that higher rate tax payer can claim say 25% ownership of the rental and so only pay higher tax on this part of the profit.????
also would there be any advantage to having the family home property in the higher rate payers name only- meaning that each person has one sole property.
or
is it worth going down the road of setting up as a ltd company??? this i need to read more about but was mentioned to me.
any advice welcome
0
Comments
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if the higher rate tax payer was removed from the deeds of the rental, then tax is only payable by the paye person @ basic rate----yes??
Surely this depends on the income of the basic rate PAYE person? If their PAYE income and half share of rents was £43,000 no higher rate tax but every £1 extra rent over that is taxable at higher rate so could be absolutely no benefit.
And if you have a loan you have been claiming as an expense against the rents you need to consider the new rules which will prevent you claiming this in full as an expense from now on (and completely not claimable as an expense in a few years).
Looks to me like professional advice is the best option here, not an internet forum where, with the best will in the world, we will never know all facts which could be relevant.0 -
also would there be any advantage to having the family home property in the higher rate payers name only- meaning that each person has one sole property.
any advice welcome
For too many reasons to go into (e.g. Are you really each going to live in separate properties?) do not take this potentially disastrous route. There is quite a difference between having one house and having one main residence.0 -
this will cover some, but not all of the issues you raise. To cover all would need a book
I am assuming that Scotland is still part of the UK and is subject to the same tax rules as the rest of us
by joint do you mean Joint Tenants (ie mandatory split 50/50) or do you mean Tenants in Common with defined shares, which may coincidentally be 50/50 or some other split?a rental in joint names.(husband and wife).
knowing if JT v TIC is important for how you can alter things
did you, or your wife, or you together as a couple ever live in the rental property as your then main/only home whilst (importantly) also being its owner? That has (catastrophic) implications for eventual CGT if you alter the ownership to sole name. If never lived in as main/only home then alteration of ownership has fewer implications
tax is only payable by the one remaining owner, whether that means they are still basic rate depends on what their total income is...one of us is due to go pt paye at basic tax and pt self employed, pushing total income into the higher rate tax.
the other is paye at basic rate.
if the higher rate tax payer was removed from the deeds of the rental, then tax is only payable by the paye person @ basic rate----yes??
depends if owned as TIC.also was told that higher rate tax payer can claim say 25% ownership of the rental and so only pay higher tax on this part of the profit.????
There is no magic 25% share.
If owned as TIC then the share attributed to each owner should reflect whatever share they own. That is the main advantage of TIC as it can be infinitely manipulated to vary the shares over time. It can be anywhere from 1% - 99% share depending on what makes sense from both the CGT and income tax perspective considered together.
CGT less relevant if never lived in as main home since you are a married couple there altering the shares between the 2 of you does not trigger CGT until you finally sell off the rental proeprty
You are a married couple. For CGt purposes you are one "unit" and have one and only one main home, the one "you" live in. There is no advantage to having the family home in one name and some distinct disadvantages to so doing.also would there be any advantage to having the family home property in the higher rate payers name only- meaning that each person has one sole property.
In a nutshell, you cannot have a "his" and "hers" house and expect to get CGT relief on both
would require detailed comparison of your respective financial circumstances using actual numbers in total detail - go see an accountant for full and proper adviceis it worth going down the road of setting up as a ltd company??? this i need to read more about but was mentioned to me.
in a nutshell for an existing property its very unlikely because of the substantial upfront one off costs incurred with changing ownership of the property from "you" to the legally separate entity of a company0
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