Will we have to pay tax on property which will be let?

whiskywhisky

Hi All

We (my wife and I) have had an offer accepted on a property yesterday, which we are planning to "buy to let". However this will be a fully cash purchase, I am employed and pay the basic tax allowance, but my wife is a house wife with no income.

My wife will do all the work needed for the private "let" (i.e. maintenance, getting the rent etc). Therefore we want to declare ALL the rental income (estimate will be around £6000 a year) as an income for my wife. This obviously should mean we do not have to pay any tax, as it will be below the £6475 personal allowance threshold.

However my query is does it matter whose name the property will be in? If I ask the solicitor to put in both our names, which is what we want - can we still declare all rental income solely for my wife?

Many thanks

Pumpkinface_2

No you can't do that. The income has to be allocated in proportion with ownership.

CLAPTON

do you have a mortgage on the property you live in?

whiskywhisky

Clapton - yes we do.

And I know this is all wrong and the mortgage should be in the buy to let. However the property we are hoping to buy is a repossession and the company is asking for a 28 day sale, and I dont really want to risk getting a mortgage and not doing the sale in time.

FYI - our mortgage is a fix and still has 3 years to go.

Thanks

CLAPTON

whiskywhisky wrote: »

Clapton - yes we do.

And I know this is all wrong and the mortgage should be in the buy to let. However the property we are hoping to buy is a repossession and the company is asking for a 28 day sale, and I dont really want to risk getting a mortgage and not doing the sale in time.

FYI - our mortgage is a fix and still has 3 years to go.

Thanks

No, its not all wrong.

You are allowed to offset your mortgage (interest payments) up to the purchase price of the BTL property EVEN if the mortgage is on your own residential property and not the BLT

You need to start reading around about lettting property and the allowances.

whiskywhisky

Ok thanks will do.

On a slightly side issue, the EA where we are buying the property arranged for us to meet their mortgage adviser, even though we did not ask for this.

Anyway this was only yesterday evening, and even though I do not know a lot about all this I was also under the impression that the property will need to be in my wifes name if we want to declare all the rental income under her name. But the mortgage adviser stated this was not the case - I was not 100 % convinced hence why I thought I would try MSE.

whiskywhisky

Totally confused now - just spoke to HMRC helpline to confirm all this.

I was told that it does not matter if the property will be in my wifes name or both our names, as long as we declare all the rental income within my wifes name.

I need to contact a solicitor to start this house purchase, but still feel unsure what is correct and whose name (s) we should have the property on.

socrates

How can you even consider buying something on a time limit when you have so many unanswered questions and are completely new to this?

Walk away from this one - do your research properly, look into yields, pitfalls, legal requirements as a LL etc etc etc.

Once you have done all this prices will probably have come down anyway - so it would have benefited you.

Its a massive purchase and you are being hand held by people who stand to benefit from YOU spending all the money and them getting commission - DO THE MATH

whiskywhisky

socrates - thanks for your advise.

Personally (could be wrong) I do not think I have many unanswered questions, solely the one regarding the difference between declaring the income tax as a single owner or joint owner of the property.

I have owned a couple of btl in the past, but they were before I was maried. Therefore do have some info on the requirements of letting.

socrates

whiskywhisky wrote: »

socrates - thanks for your advise.

Personally (could be wrong) I do not think I have many unanswered questions, solely the one regarding the difference between declaring the income tax as a single owner or joint owner of the property.

I have owned a couple of btl in the past, but they were before I was maried. Therefore do have some info on the requirements of letting.

So what is your yield on this one?

There are many more regulations now than there ever has been. So a quick look on LandLordzone.com might confirm that you have all the facts to hand.

Good luck!

Pumpkinface_2

whiskywhisky wrote: »

Totally confused now - just spoke to HMRC helpline to confirm all this.

I was told that it does not matter if the property will be in my wifes name or both our names, as long as we declare all the rental income within my wifes name.

I need to contact a solicitor to start this house purchase, but still feel unsure what is correct and whose name (s) we should have the property on.

I found this hard to believe, it is generally not allowed to artificially split income so as to maximise personal allowances so I don't understand why this would be an exception.

"Jointly owned property no partnership" section in the below would appear to be at odds with what you were told on HMRC helpline.

http://www.hmrc.gov.uk/manuals/PIMMANUAL/PIM1030.htm

and this...

http://www.propertytaxation.co.uk/info/a-jointly-owned-property.html