Buy investment property joint or solely?

MoneySpendingExpert888

Me and my partner (not married) currently have a joint mortgage on the property that we live in which is our main home.

We have looked into an additional property as a form of investment, undecided yet if it will be:

1. Buy, Refurb, Sell
2. Buy, Let

In the price ranges in which we are looking at for this additional property we could probably afford to get one each. But my only issue is figuring out the best profitability scenario.

This is an example of what i currently see:

If option 1 (Buy, refurb, sell) then it would be best to take a joint mortgage because if the aim is to refurb and sell then the strategy is short-term and you will also get 2 x CGT Allowances when come to selling (is this correct?).

If option 2 (BTL) then doing this solely might make more sense because it will most likely be a long term investment and if we get a joint mortgage on a BTL then technically we will own 2 properties jointly (the one we live in + the BTL property) BUT we will be listed as having two mortgages EACH, which i think will affect further lending in the future? because the mortgages for both properties will be on BOTH our credit files.

Is anybody able to offer any advice or to clarify if i have made any wrong assumptions? Thanks

anselld

Option 1 would be classed as Trading by HMRC and therefore subject to Income Tax rather than CGT.

Under Option 2 the fact that the mortgage appears on two credit files is not an issue provided you are both creditworthy. Joint ownership is preferable in this case from a CGT viewpoint. The actual ownership proportions could depend on who is likely to be a higher rate tax payer or a non taxpayer. If both same tax status then 50:50.

ck_uk

May I add a related question to this thread?

What happens if you purchase on a BTL mortgage with the intention of letting, but then change your mind and sell? Is that CGT or Income Tax?

pjcox2005

Potentially CGT for that, but it would likely be a discussion point and a balance of probabilities on the factors that evidence it.


e.g. any evidence intention was buy to let, did it get marketed post-refurb, is there a track record of buy, refurb and sell on other properties etc.

ck_uk

..to answer that - purchase on a BTL mortgage with buy to let intentions, but never marketed for letting and never actually let. no track record of refurbing properties.