Buy to let questions.

buytwolet

I am imminently due to receive a 1/6th share of the proceeds from my parents house ~£40k.

If I was to give this to my wife as a deposit on a second property with a LTV of 75% would I be able to receive the rental income within my personal allowance and therefore tax free (stay at home dad).

We have got an agreement in principle at 3.99% with a consent to let clause in place.

The expected rental yield would be ~£650 a month and the mortgage payment of £633 over 120 months works out at an average of £333 in principal and £300 in interest payments.

Assuming no house price growth my initial deposit would give me a 100% return if I were to then sell.

This will be a new build covered by the 10 year guarantee and for the purpose of simplicity I am ignoring agency fees, voids and maintenance.

Thanks.

Thrugelmir

buytwolet wrote: »

If I was to give this to my wife as a deposit on a second property with a LTV of 75% would I be able to receive the rental income within my personal allowance and therefore tax free (stay at home dad).

Your wife is the property owner. So her income.

pathtofreedom

I don't think your numbers are adding up, what about insurance, gas certificates, legal fees, credit checks and agency fees, voids, capital gains tax?

You can't just ignore these if you're running the btl as a business and that is how you have to approach this and not just as a hobby. Can you afford 6 months or more of no rent coming in while trying to evict someone along with associated costs.

You'd be safer and potentially earn more just putting the money in some high interest saving accounts, before rushing into this without working the numbers out correctly else you could end up with a big loss.

buytwolet

Thrugelmir wrote: »

Your wife is the property owner. So her income.

Thank you Thrugelmir.

Do HMRC see the same way? Worst case scenario then would be higher rate tax on all but the interest element so £120 of the income would be 'tax'?

Pathtofreedom; the profit element is secondary to my true purpose and that is to allow our children access to an outstanding comprehensive school in 5 years time when we will switch our main residence (jointly owned 50% ltv) and rent out the current family home which is a feeder into an excellent primary school where they are in attendance right now.

Mortgage payments on both properties come to less than 25% of our net income so I don't mind bearing some costs with said goals in mind/sight.

anselld

buytwolet wrote: »

Do HMRC see the same way? Worst case scenario then would be higher rate tax on all but the interest element so £120 of the income would be 'tax'?

As far as HMRC is concerned rental income follows ownership.

You should buy the property jointly in order to use your wife's income to cover the mortgage. You can then own as Tenants in Common 99% you : 1 % wife.

This allows you both to be on the deeds and on the mortgage, but gives you most of the income.

You need to submit Form 17 to HMRC electing to split income by ownership rather than the default 50:50 for married couples.

dimbo61

This will be a new build covered by the 10 year guarantee and for the purpose of simplicity I am ignoring agency fees, voids and maintenance


What about buying and selling costs as well

buytwolet

Thank you Anselld for the appropriate and actionable response.

dimbo61 wrote: »

What about buying and selling costs as well

I've bought and sold a property before taking a £20,000 loss (excluding selling fees which pale by comparison). I'm playing a very different game to everyone and can live with these sort of losses.

G_M

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jayson043

No it's her income. Why don't you own it, stay at home and use your personal allowance? Or jointly own it? Or she stays at home. Or just pay tax on your profit. From the sounds of it, it's not a profitable investment and as you state profit isn't your motive. Why complicate things to avoid a few pounds in potential tax?