Tax on property

Lohman

Hi,
Just after some advice. My partner and I have some money to invest and want to rent out a property. My partner has a good salary and pays higher rate tax and I currently don't work as I'm looking after small children. We have seen a couple of houses that appeal to us and we are trying to decide whether to get a BTL mortgage or pay cash in full. I know there are tax implications as there is tax relief on mortgage interest. However, we would like to use my tax allowance so thought that if we bought outright the property could be in my name - so no need to pay tax on rental income. Other people have advised that this may not be best though as with the sum we have to invest we could get 3 or 4 properties with a mortgage.
If we buy one property with cash, could it then be mortgaged (BTL) later on by my partner if we decide to go down that route? (thinking of paying cash to get a better deal on house price). If we cn do this, what about transferring the ownership from me to partner to get the mortgage. Are there tax implications with this and can it even be done?
Thanks in advance if you can shed any light on this!

CLAPTON

'partner' means you are not married?

anselld

You can own as Tenants in Common with an unequal split of ownership, e.g. 99%:1%. This allows you to make use of your tax allowance whilst your partner can still be on the mortgage (and the main contributor to the mortgage as far as affordability is concerned).

You can buy cash and mortgage later, but it will be more expensive in legal, survey, search fees, etc as you will be repeating much of what you did at the initial purchase when you mortgage.

Also - don't be driven to get a mortgage just to get tax relief. It is only sensible if you can invest the capital you release for a better return than your mortgage rate.

Lohman

Thank you.
Yes by partner - we are not married.
Anselld - I have looked at all the savings rates and they are not good so I keep coming back to the idea of renting property to get a better return on the money. But it is very confusing as there are all the fees of mortgage and letting etc that need to be taken into consideration for the return on investment.

CLAPTON

the tax situation is different between married couples and non married couple in a couple of important ways

a. for joint ownership you can choose the division of rental income in any ratio if you are NOT married; if you are married it must be in the same proportion as your ownership

b. if you transfer ownership between and and you are NOT married then you are liable for capital gains tax (cgt) whereas married couples are exempt.


I would suggest you start

a. by drawing up a spread sheet for just one property of all your costs etc and model the tax situation


and

b. find out all the legal issues of being a landlord; gas safety checks, deposit a/c etc etc

and see if it is really for you