Buy to Let / Income Tax / Capital Gains Tax

si001

Hi,

We are looking at buying a flat to rent out and I just want to cover a few points before I go and pay for professional advice.

1. I'm a lower rate tax payer so is it better, in terms of Income tax, that the mortgage is in my name. Than if it is in joint names as my wife is at the higher rate.

2. Does the same matter when we come to sell, or is it better to be joint as we would have double the Capital Gains Tax allowance.

3. If we eventually move into the rented flat (sometime in the next 5 years) and sell our existing property, do we miss out on the CGT completely? If so is there a time limit on how long we have to live in the flat.

Thanks in advance.

Si

N79

si001 wrote: »

Hi,

We are looking at buying a flat to rent out and I just want to cover a few points before I go and pay for professional advice.

1. I'm a lower rate tax payer so is it better, in terms of Income tax, that the mortgage is in my name. Than if it is in joint names as my wife is at the higher rate.

The tax man does not care whose name the mortgage is in.

2. Does the same matter when we come to sell, or is it better to be joint as we would have double the Capital Gains Tax allowance.

Again, the mortgage is irrelevant to determining CGT liability.

3. If we eventually move into the rented flat (sometime in the next 5 years) and sell our existing property, do we miss out on the CGT completely? If so is there a time limit on how long we have to live in the flat.

If the flat becomes you main residence then there would be no CGT liability.

si001

So it doesn't matter how we pay for the flat. As long as the flat is in the lower tax payers name, then we pay the lower rate. Correct?

N79

Correct, income is taxed in proportion to the property's ownership.

CLAPTON

well lets see

you can offset the interest on the mortgage against the rental income
for that you must own and have the mortgage in your name or you can both jointly own and have the mortgage jointly in your names

for income tax it would seem better to have the income in the name of the person paying 20% tax assuming of course that you will have an income tax liability


for cgt then cgt is charged at 18% and /or 28% of the gain although I would be amazed if this was still the case in 5 years time. Depending upon how much the gain is it would probably be better to have joint ownership so you could both use the 10,100 cgt allowance


if you move into the property then cgt may still be payable
the gain for cgt is assumed even over the period of ownership
the period you were resident is exempt as is the last 3 years
there is letting relief too
and the 10,100 allowance
so you might well avoid paying any cgt but it all depends upon the numbers

sunshinetours

N79 wrote: »

If the flat becomes you main residence then there would be no CGT liability.

Not correct - there may be a mixed period of ownership which would be time apportioned for the time it was let out and the time it became your main residence