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  • FIRST POST
    • danm
    • By danm 5th Mar 17, 1:01 PM
    • 419Posts
    • 145Thanks
    danm
    Options to reduced tax liability on BTL
    • #1
    • 5th Mar 17, 1:01 PM
    Options to reduced tax liability on BTL 5th Mar 17 at 1:01 PM
    Guys,
    Want to purchase second property as investment.

    I am an additional rate taxpayer
    my wife does not work - her total earnings are interest income and are less than the tax free allowance.

    Looking at various financing options and pro/cons.

    initially i was thinking to get the Property and Finance solely in wifes name - but discussion with broker suggest i cannot raise mortgage. Unlikley that lenders would accept a guarantor on a BTL also.

    Joint owners/Joint finance - Easier to underwrite from finance perspective but still leaves 50% of the income in my name with additional liability.

    I then did some googling and understand that we can own the property as tenants in common. 99% in Wires name, 1% in my name... How does this work alongside the mortgage payment however as that would be a joint application.

    My assumption is that this is all above board. are there any alternate options?

    thanks in advance
Page 1
    • Dazed and confused
    • By Dazed and confused 5th Mar 17, 1:05 PM
    • 1,604 Posts
    • 689 Thanks
    Dazed and confused
    • #2
    • 5th Mar 17, 1:05 PM
    • #2
    • 5th Mar 17, 1:05 PM
    If your main concern is reducing the tax then you are presumably charging more intent than your mortgage interest and other costs so the simplest method would no doubt be to make the rent ultra affordable, less income = less tax
    • danm
    • By danm 5th Mar 17, 1:24 PM
    • 419 Posts
    • 145 Thanks
    danm
    • #3
    • 5th Mar 17, 1:24 PM
    • #3
    • 5th Mar 17, 1:24 PM
    the main concern is to maximise the return to me and my spouse jointly, while minimising the amount we jointly pay to HMRC.

    not sure why anyone would ever charge less rent unless the impact would be to avoid moving into next marginal tax bracket?
    • GDB2222
    • By GDB2222 5th Mar 17, 1:35 PM
    • 13,899 Posts
    • 74,463 Thanks
    GDB2222
    • #4
    • 5th Mar 17, 1:35 PM
    • #4
    • 5th Mar 17, 1:35 PM
    I think you can actually hold it as tenants in common with 100% beneficial interest for your wife, not 99%. This will simplify your tax return.

    I'm quite surprised your wife can't get a BTL mortgage in her sole name. What LTV are you looking for?

    Be aware that government is gunning for BTL. Nobody loves a landlord, so you can expect the tax and regulatory situation to worsen over the years.
    No reliance should be placed on the above! Absolutely none, do you hear?
    • TempUserName123
    • By TempUserName123 5th Mar 17, 1:38 PM
    • 33 Posts
    • 8 Thanks
    TempUserName123
    • #5
    • 5th Mar 17, 1:38 PM
    • #5
    • 5th Mar 17, 1:38 PM
    Lease the property to your wife for £1 a year. Then she can then let it out as normal
    • uknick
    • By uknick 5th Mar 17, 1:42 PM
    • 657 Posts
    • 289 Thanks
    uknick
    • #6
    • 5th Mar 17, 1:42 PM
    • #6
    • 5th Mar 17, 1:42 PM
    the main concern is to maximise the return to me and my spouse jointly, while minimising the amount we jointly pay to HMRC.

    not sure why anyone would ever charge less rent unless the impact would be to avoid moving into next marginal tax bracket?
    Originally posted by danm
    My brother charged his MIL rent equal to his mortgage interest payments, so made no profit.

    Why did he do this? She was on housing benefit and I guess his interest payments were about the maximum she could get under the Local Housing Allowance rules so she was not out of pocket.
    • Wayne O Mac
    • By Wayne O Mac 5th Mar 17, 2:34 PM
    • 204 Posts
    • 253 Thanks
    Wayne O Mac
    • #7
    • 5th Mar 17, 2:34 PM
    • #7
    • 5th Mar 17, 2:34 PM
    Lease the property to your wife for £1 a year. Then she can then let it out as normal
    Originally posted by QuickRebates
    This is incredibly bad advice.
    • danm
    • By danm 5th Mar 17, 2:37 PM
    • 419 Posts
    • 145 Thanks
    danm
    • #8
    • 5th Mar 17, 2:37 PM
    • #8
    • 5th Mar 17, 2:37 PM
    I think you can actually hold it as tenants in common with 100% beneficial interest for your wife, not 99%. This will simplify your tax return.

    I'm quite surprised your wife can't get a BTL mortgage in her sole name. What LTV are you looking for?

    Be aware that government is gunning for BTL. Nobody loves a landlord, so you can expect the tax and regulatory situation to worsen over the years.
    Originally posted by GDB2222
    75%

    The problem- as I am led to believe is that lenders require some employment/ earnings....even if low, to cover rental voids...
    • danm
    • By danm 10th Mar 17, 9:50 PM
    • 419 Posts
    • 145 Thanks
    danm
    • #9
    • 10th Mar 17, 9:50 PM
    • #9
    • 10th Mar 17, 9:50 PM
    Thanks for pointers here guys. Seem like the tenants in common route is most effective.

    Quick question.... Will a Standard conveyancing solicitor be able to set up the appropriate trusts etc or do I need a specialist?
    • anselld
    • By anselld 10th Mar 17, 10:05 PM
    • 5,255 Posts
    • 4,790 Thanks
    anselld
    Thanks for pointers here guys. Seem like the tenants in common route is most effective.

    Quick question.... Will a Standard conveyancing solicitor be able to set up the appropriate trusts etc or do I need a specialist?
    Originally posted by danm
    Tenants in Common, 99:1. Standard conveyancing, can be entered on form TR1 at purchase, doesn't even need a trust deed. However you must register with Form 17 to HMRC as well.
    • booksurr
    • By booksurr 10th Mar 17, 10:34 PM
    • 3,614 Posts
    • 3,995 Thanks
    booksurr
    doesn't even need a trust deed. However you must register with Form 17 to HMRC as well.
    Originally posted by anselld
    the Form 17 however does need either a declaration of trust or a deed of trust to support the split of beneficial interest claimed on said Form
    • GDB2222
    • By GDB2222 11th Mar 17, 8:39 AM
    • 13,899 Posts
    • 74,463 Thanks
    GDB2222
    Any solicitor can draw up a simple deed of trust.
    No reliance should be placed on the above! Absolutely none, do you hear?
    • anselld
    • By anselld 11th Mar 17, 11:44 AM
    • 5,255 Posts
    • 4,790 Thanks
    anselld
    the Form 17 however does need either a declaration of trust or a deed of trust to support the split of beneficial interest claimed on said Form
    Originally posted by booksurr
    If it is done at the point of conveyance then Section 10 of TR1 acts as a declaration of trust and the unequal split of shares can be recorded there. A separate trust deed is not needed.
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