Does BTL purchase have to be in wife's name to use her tax breaks ?

mikeyw

I'm looking to purchase a BTL investment but want to minimise tax liabilities...I'm a 40% tax payer and my wife 25%...for us to use her lower tax rate does the property have to be purchased in her name ?

Is joint ownership ok ? Or doesn't it matter as we are married ?

Just don't want to make a mistake at the buying stage that takes a lot of undoing later on

Tia,
Mike

kidmugsy

Do remember that if you "put it in her name" it is hers.

martinsurrey

A lot of misleading information here.

HMRC do not really care about LEGAL ownership, they care about beneficial interest in the property.

Legal ownership is just one factor used to determine this, but is not water tight.
You can complete a form 17 and send it to HMRC to inform them of the real beneficial interest in a property, but you have to prove it.

www.hmrc.gov.uk/forms/form17.pdf

The easiest way to prove it is with a deed of trust between husband and wife that states that the lower rate tax payer is entitled to 100% of the rental income from the property, get this done through a solicitor, send it in with a form 17, and problem solved.

The deed of trust matters in terms of tax but in case of divorce, it’s worthless, as assets are split by the court based on fairness, NOT legal paperwork.

The above is what I would do, its NOT advice, if in doubt, get paid legal/accountant advice.

00ec25

as they are married then...

a form 17 is only relevant if the property is held as tenants in common - in which case the Form 17 must tie in precisiely with the legal ownership share

if held as joint tenants then for tax purposes the benefical ownership is the same as legal ownership for married couples ie 50/50. You canmnot alter this by simply having a declaration of trust

martinsurrey wrote: »

A lot of misleading information here

read the form ... "do not use this form about ...
property that is not held in unequal shares (you cannot choose to have the income taxed on an unequal basis because you think it would be to your advantage)."

xylophone

http://www.hmrc.gov.uk/manuals/pimmanual/pim1030.htm might be worth a look.

martinsurrey

xylophone wrote: »

http://www.hmrc.gov.uk/manuals/pimmanual/pim1030.htm might be worth a look.

my bad, I havnt seen the 2011 rewrite

"
A declaration cannot be made where a husband and wife or civil partners own property as beneficial joint tenants. In these circumstances the couple do not own the property in shares at all, but are entitled jointly to the whole of both the property and the income.
"

so you can buy under both names as tenants in common and give your wife 99.99% of the property (so its in both names, but held in unequal shares), she would then recieve 99.99% of the income.

mikeyw

Wow thanks guys - so in summary signing in both names is fine here and i can offset tax in my wife's name even though it's joint owned ?

Does this joint signing have to happen at the auction or only on competition ?

anselld

mikeyw wrote: »

Wow thanks guys - so in summary signing in both names is fine here and i can offset tax in my wife's name even though it's joint owned ?

Does this joint signing have to happen at the auction or only on competition ?

Be careful. You must instruct your solicitor that ownership is "tenants in common" with whatever percentages you specify. This is done at completion.

It is not just a case of "signing in both names is fine"; it depends exactly what you sign!