First buy to let

tlee

Hi All

After some advice as I'm trying to get into BTL for first time and getting different advice from interneet, etc. so apprecaite any advice.

I live with my partner (we are not married) and our 6 year old daughter. I am a higher rate taxpayer and my partner is part time child minder on £10k earnings. I want to buy a cheap flat outright with no mortgage and rent it out ... maybe sell in the medium-term future or poss keep it for my daughter. I would personally have to fund it as my partner has no savings. I am not sure of a few things relating to tax etc for CGT and income tax:

1. How to 'structure' the purchase for tax efficiency/benefits e.g. in her name, mine, or joint?

2. If its bought in her name or joint, what happens if we split up?

3. How do we minimise our tax liability if in split ownership with regard to (i) rental income and (ii) capital gains tax if/when we sell ?

4. Can I just give her the money to buy it or are their tax implications on this 'gift'?

5. Anything else I'm not thinking about and should be e.g. buying through a pasrtnership, trust fund, or a company,etc?

I know its a bit of a mess but looking for experienced advice before I get my fingers burnt as there a re many issues with the flat like only a 50 year old lease left and absent freeholder!!

Thank you all in advance

HappyMJ

How about getting married first?

The problem with not being married and you gifting a significant sum is if she dies you could lose it to her heirs. You are not entitled to her share automatically.

If you split up it's hers she can keep it. You don't get it back

Get married buy it jointly and ownership of it passes to you if she dies.

tlee

Thank you but marriage seems a bit drastic! I'm buying next week...was after some alternatives ideally!

le_loup

tlee wrote: »

I live with my partner (we are not married) and our 6 year old daughter.

tlee wrote: »

Thank you but marriage seems a bit drastic! !

What a weird world we live in!

tlee

I agree... rationale - she is French and apparently this is very 'fashionable' and almost normal in their young culture these days. The marriage would need to be done quickly which could cause issues and dare I say it would also seem an unethical reason to wed if purely for financial reasons!

CLAPTON

tlee wrote: »

I agree... rationale - she is French and apparently this is very 'fashionable' and almost normal in their young culture these days. The marriage would need to be done quickly which could cause issues and dare I say it would also seem an unethical reason to wed if purely for financial reasons!

is it 'ethical' to worry about what happens if you split from the mother of your child?

or is it 'ethical' to worry about minimising tax?

for thousands of years marriage was mainly about money and stability for child raising
do you know what would happen on your death or the mother's death?

kidmugsy

CLAPTON wrote: »

for thousands of years marriage was mainly about money and stability for child raising

Spot on! You'd rather expect a Frenchwoman to understand. What ever happened to a Cartesian education?

Savvy_Sue

In the absence of marriage, MAKE A WILL! (Actually, you should do one each.)

Pennywise

Savvy_Sue wrote: »

In the absence of marriage, MAKE A WILL! (Actually, you should do one each.)

Sound advice, but you can both change your wills on a whim, so only good while it remains in force. Not a long term solution to ensuring that the BTL comes back to you or goes to your daughter if your partner dies.

You can't have it both ways. If you want the benefits of marriage, i.e. tax saving in this case, but plenty more benefits, then get married. If you don't want to get married, then you can't have the marriage benefits.

But, back to the OP, yes, you can "give" the money to your partner for her to buy the BTL and then she'll pay tax on both rental income and future capital gains, probably at lower tax rates than you'd pay if it were in your name. Just think of it as giving away the money with no come-back if things go wrong though as the BTL will then be hers to do with as she wishes. Alternatively, you could set up a legal agreement whereby you are merely "loaning" her the money and that she remains liable to repay it to you, perhaps secured on the property - maybe something to talk to your solicitor about!

Savvy_Sue

Pennywise wrote: »

Sound advice, but you can both change your wills on a whim, so only good while it remains in force. Not a long term solution to ensuring that the BTL comes back to you or goes to your daughter if your partner dies.

However better than the alternative: whatever the situation, when one half of a co-habiting couple dies intestate there is usually a mess left behind.

jimmo

1) From an Income Tax point of view, not being married does have its advantages because, if you become joint owners, you can split the profits between you as you please. So your partner could be a 10% owner and have all the income.
http://www.hmrc.gov.uk/manuals/pimmanual/PIM1030.htm
From a Capital Gains Tax point of view owners in a joint tenancy each own an equal share of the property and will be assessable on an equal share of any gain. Tenants in Common each own a defined share of the property so if your partner owns a 10% share she will be assessable on 10% of the gain.
2) If you split up I would say that the most important thing will be whether you can reach an amicable financial agreement because, married or not, if you can’t, any tax consequences will be miniscule compared to the lawyers’ fees in a protracted separation.
3) Answered in (1) I think.
4) As long as you promise not to die in the next 7 years, yes you can give her the money with no tax consequences.
5) If the lease on the flat you are buying has less that 50 years to run it is a Wasting Asset. For Capital Gains Tax purposes that is a huge problem. Take a look at this link.
http://www.hmrc.gov.uk/manuals/cgmanual/cg71144.htm