Buy 2 Let Advise Needed

JKell

Hi

My wife and I own a house currently and its registered under both our names. We are planning to buy a bigger place (second home) and let out our existing house.

My wife doesnt work and I'm in the 40% tax slab - so,
1. Will we be eligible for any tax break/saving if we show the rental income as income for BOTH of us? If we get £1000 as rent pcm, are we better of filing tax separately showing £500 as the income per head pcm?

2. Are there any advantages/disadvantages of buying our second home in both our names?

Many thanks,
JK

tlc678910

Hi,

As you own the house together (equally I assume) you have to declare 50% of the income/expenses each on your tax return. So I expect you will pay 40% on your share of any profit and your wife won't pay tax if she is under her tax free allowance.

The rules on tax relief on mortgage interest are changing and as a higher rate tax payer you can only claim tax relief on it at basic rate. If you have a mortgage and so mortgage interest as a deduction you as a 40% tax payer will pay this extra tax above the profit you make.

As you already own property when you purchase you will need to pay an extra 3% stamp duty on your purchase for the whole purchase amount on top of normal stamp duty. This is the case if either of you owns the property and either of you buys as you are treated as a couple rather than individually.

Tlc

booksurr

JKell wrote: »

My wife and I own a house currently and its registered under both our names. We are planning to buy a bigger place (second home) and let out our existing house.

just to clarify the emphasis:
- you are married
- it is jointly owned
- therefore you have no option as tax law REQUIRES you to split the income 50/50 irrespective of how you may want to split it. So yes, both of you MUST declare your respective net profits and pay tax thereon according to your own tax rates

the only way to change that is to file a Form 17 and a supporting Declaration of Trust - google it, this question comes up many times

JKell wrote: »

2. Are there any advantages/disadvantages of buying our second home in both our names?

none either way. You are married so changing the ownership at a later date for tax purposes (ie CGT) triggers nothing, you can alter it as many times as you want. Obviously when you sell it will be better sold as joint owners so you each get your CGT allowance.

if you divorce then it is simply a marital asset to be divided up irrespective of who legally owns it

PS you are letting to buy, not buying to let....