Buying a second home tax questions

matluz

Hi,
I would like to know how I stand if I buy a second home. I fully own my house that I live in and my wife is NOT on the deeds.

I wish to buy a small property and move into it paying around 50% off and getting a mortgage or possiby a loan if I pay 75% off. I would then rent out my owned home and live in the smaller mortgaged home.

If I rent out my home do I have to pay tax on the income? What other rules or taxes would I incur by buying a second home?

Also I have been told that if the second home is in my wife's name then we both own only one property and this may be beneficial to us both? My purpose is to be able to afford to stay abroad for a few months a year for retirement and have an income from the present house to give me a small income.
Thank you for any direction you can give.
Mat:beer:

alchemist.1

Yes you will need to pay tax on your income. You will pay capital gains tax if you come to sell the property.

You wont get round capital gains tax by just having your wife on the deeds of the second home and claiming that is her main residence and the other one is your main residence. That would also count as fraud.

Married couples are only allowed one property as main residence.

PS by renting out the bigger property you may be liable for more CGT rather than doing it the other way round.

G_M

matluz wrote: »

Hi,
.....
If I rent out my home do I have to pay tax on the income?
Yes unless you can offset it against allowances. see link below
What other rules or taxes would I incur by buying a second home?
SDLT,, council tax etc
and CGT when you sell
Also I have been told that if the second home is in my wife's name then we both own only one property and this may be beneficial to us both?
Depends where you each live and where your primary residence is. Are you separated?
But anyway, if one property is rented out clearly it's not either of your primary residences.

Mat:beer:

Read:

* New landlords: advice, information & links

and

Tenancies in Eng/Wales: Guides for landlords and tenants

Kynthia

The property you buy won't be your second home, it will be your home. You're no longer going to live at all in your first property and it will become a rental property generating income.

All rental income needs declaring to the HMRC, then you can deduct allowable expenses in order to calculate taxable profit and the tax to pay.

You should probably get professional advice about whether to have one property owned by each of you or whether to both own both properties. The decision could impact the income tax you pay on the rental income and the CGT on the first property once you come to sell.

As a landlord you'll have regulat you'll need to follow when it comes to gas safety cents, maintenance of the property, deposit protection, etc

booksurr

current property is owned in your name only therefore all income from it is yours and cannot be shared with your wife when calculating your rental profit when you let this property

as it is and always has been your property even when married then for the purposes of CGT only you have a claim for private residence relief, your wife does not. Therefore it is vital it remains in your ownership once it is let otherwise if you r wife becomes owner she have a massively increased CGT bill

for the new property as you are married it does not matter whether you, wife or both of you own it as in tax law it is the marital main home and therefore exempt from CGT. On the other hand the other property is no longer a home because it is now let and so is exposed to CGT (against which you have a claim to PRR and letting relief, but your wife does not). There would be long term advantages to both of you owning the new property because you can then better control your exposure to inheritance tax. I see no advantages to only your wife (or you) owning it individually

there would be great advantages to making your wife a co-owner of the current property BEFORE you both move into the new marital home as she would then have a claim to PRR and letting relief and an extra personal allowance thereby greatly reducing the eventual CGT bill when it is sold. One downside would be the rental income would then have to be split between you and wife according to your respective ownership shares

matluz

Thank you for the comprehensive answers that you have all given. I now have a good idea of what is involved with this investment idea. I will read up some more as advised before I make a decision.

Many thanks
Mat