Buy to Let whose name?

IvorBiggun

Hi

Myself and my wife have had an offer accepted on a buy to let property.

I am a higher rate tax payer, she is basic rate.

Does the name we buy it in effect who pays the tax, i.e. should we buy it in only my wife's name to minimise tax paid or can we buy in joint names and declare all the income to be hers??

thanks in advance.

holly_hobby

Hi,

You can of course pch (and mortgage) in solely Mrs Ivor's name (subject to status) - but if you want to retain legal ownership, control and rights of your own - purchasing jointly is the way to go.

As you are married and you are a higher rate tax payer, if you purchase under a joint tenanacy (as we typically do when purchasing as a couple), HMRC will make the assumption that the rental income and benefit will be split equally, and you will be exposed to tax on a 50/50 basis.

Now as you are a higher rate tax payer this obv isn't beneficial or attractive to you - but there is a solution.

You purchase as tenants in common (TIC), under which you can split the legal (and accepted beneficial) ownership on an unequal basis ie 99/1 in Mrs Ivor's favour (or however you want to apportion it). No extra work, just your sol will ensure its registered in this format with Land Reg.

You then complete and submit HMRC Form 17 (attached) - which formally advises HMRC of the legal ownership and corresponding split of rental income (which must be identical to the legal ownership division as under the TIC, ie 99/1 or whatever).

Having done this, you then each declare your split of the net rental income for income tax in accordance with your ownership, which is reported within your own annual SA's.

Owning the property under a TIC arrangement has no bearing on the legal responsibility of servicing any mortgage, which remains jointly and severally liable between the 2 of you.

There is also no automatic tsf of ownership upon the death of either of you (as we see with joint tenancy arrangements). But means that you can bequeath by will your ownership to anyone other than the joint owner, or if no will it will follow intestacy laws. Although you are married, I would top and tail this with an updated will just to ensure there are no dealys or hic-cups with tsf of ownership between you on first death.

Heres HMRC Form 17 for you (pretty self explanatory to complete ) - http://www.hmrc.gov.uk/forms/form17.pdf

Hope this helps

Holly x