Tax implications in renting property-please HELP

Sandie11

Hi
Can anyone advice me on what to do. My husband has inherited 50% of a house and we are going to buy the other 50% from a family member and then rent it out.

Do we put the house in joint names being my husband and I or just his.
I am a higher rate tax payer and my husband is not, also I dont know if this makes a difference, but he is self employed.

Any advice welcome

Thanks

BitterAndTwisted

How much is the property worth and would renting it give you a better return on your investment than other products available? Bearing in mind just how much time, effort and and money will have to be spent running a business of this kind. These are the things I would be concentrating on rather than whose name/s the property should be in.

Put simply, all rental-income is taxable, bar any mortgage-interest and legitimate expenses which can be offset. This may not turn out to be the money-spinner you hope it will be but everything depends on the rental-income. A sensible landlord would allow for ten months of income for every year. Base your business-plan on that.

Sandie11

Hi
We have looked into all the costs involved and especially as we already own outright 50% this seems a very good investment. It is worth £182k and we have a mortgage on it for £90k.
The rental income is £850pm

taxsaver

I would recommend putting into your joint names as 'tenants in common'.

This will then leave you with the benefit of both of you owning and having two CGT allowances, but also with the flexibility to direct the rental income between you in the most tax efficient manner from year to year. So, for example atm you would likely split the income 1% to you and 99% to him, but that can be changed in future years should your tax positions change.

Sandie11

Sorry to sound a little thick, but with regards to splitting the income 1% to me and 99% to my husband, how does this all work, is it just a case of my husband declaring the 99% income on his tax return or is there an official way of doing this?

poppysarah

Why don't you speak to a tax advisor or accountant to get personalised specialist advice?

Sandie11

poppysarah wrote: »

Why don't you speak to a tax advisor or accountant to get personalised specialist advice?

As have experience of being charged silly amounts for advice that I can find out from all the lovely people on this forum.

Sandie11

taxsaver wrote: »

I would recommend putting into your joint names as 'tenants in common'.

This will then leave you with the benefit of both of you owning and having two CGT allowances, but also with the flexibility to direct the rental income between you in the most tax efficient manner from year to year. So, for example atm you would likely split the income 1% to you and 99% to him, but that can be changed in future years should your tax positions change.

Having looked into this a little further, I have just looked on the hmrc website and it says if you and spouse live together any income from property held in joint names is usually treated as if belonged to the two of you in equal shares (even if own in unequal shares) so you will be both be taxed on half of income.
By putting we are tenants in common, does this then change this scenario?

Thank you for any advice you can give.

Annisele

Sandie11 wrote: »

Hi
We have looked into all the costs involved and especially as we already own outright 50% this seems a very good investment. It is worth £182k and we have a mortgage on it for £90k.
The rental income is £850pm

That's not actually a brilliant yield.

Making the assumptions that you never have void periods and you never incur any costs, you get a yield of about 5.6%. Realistically, it's going to be lower than that.

Leaving aside the fact that you have about £90k of equity in the property...if you had £90k of cash instead, would you be using it to start a business letting out this particular property? If yes, great - but if no, you probably shouldn't let it out at all.

Regarding your question, HMRC does say that income from properties owned by a married couple will usually be treated as belonging 50/50 to each of them. However, it also says here that that won't be the case if:

* both entitlement to the income and the property are in unequal shares, and
* both spouses, or civil partners, ask their respective tax offices for their share of profits and losses to match the share each holds in the property.

taxsaver

Sandie11 wrote: »

As have experience of being charged silly amounts for advice that I can find out from all the lovely people on this forum.

Hmmm... well let me see; what is a 'silly amount' for gaining accurate knowledge and advice that will save you up to 20% of £850pm so about £2k PER YEAR, not to mention advice and guidance in respect of all the other costs that can be off-set against the income to maximise your tax savings even further?

I offer my advice here free, despite the fact that I make my living as a partner in an accountancy firm. You have taken the advice that I gave you and looked at HMRC's website and decided that I might not be correct; that is fine by me, I'll not add anything further and leave you to pay all the extra tax that you wish to!

Good luck.

G_M

No comment n the tax.

On renting generally see here.