Adding wife to Buy to Let: Stamp Duty...

roadweary

Hi,

The more I research, the more contradictory information I find.

I have a buy to let property. The mortgage is around 120k and the property may be worth around 220-230k.

I'm in the higher rate tax band, my wife is not.

I wish to become tenants in common with my wife in order to assist with the tax burden.

Ideally the vast majority of the rental income would be assigned to my wife.

What I'm not clear on is:

1. Does the ownership as tenants in common have to reflect the rental assignment? Eg would my wife have to own 95% of the house to receive 95% of the rent for tax purposes? Or could she own 5% and still receive 95% of the rent?

2. Can I gift some or all of the ownership to my wife without paying stamp duty?

3. I'm about to go for a new mortgage anyway, but does the split of ownership make any difference to the mortgage?

Thanks for any help.
R

HappyMJ

I'd re-mortgage it for more than you currently have then put the excess funds into your wife's name. Your expenses increase therefore your tax liability reduces and your wife's income increases. If she's a basic rate tax payer she can get £1,000 of interest per year tax free.

roadweary

Thanks - that's worth considering. But the fundamental cost, or not, of putting a ratio of the property in her name, and what that means for rental income is what I have to get to the bottom of primarily.

HappyMJ

roadweary wrote: »

Thanks - that's worth considering. But the fundamental cost, or not, of putting a ratio of the property in her name, and what that means for rental income is what I have to get to the bottom of primarily.

Would the fees and charges to make the change be worth it?

Assuming you already own a property that you live in she would have to pay 3% stamp duty on the portion she buys as it would be another property that she owns.

She would be using a mortgage to buy the property so therefore the consideration is half the mortgage i.e £60,000. The stamp duty on that is £1,800.

lovinituk

My understanding is that no matter what the legal split is, the income from rental is still split 50-50 for tax purposes.

*edit* mention of it here - http://www.theguardian.com/money/2015/jul/02/can-we-split-income-from-our-buy-to-let-house-according-to-the-portion-we-own

TrickyDicky101

lovinituk wrote: »

My understanding is that no matter what the legal split is, the income from rental is still split 50-50 for tax purposes.

That's not correct. The SDLT would be chargeable on a 50:50 basis but the rental income will accord to the TiC split - ie you can have it 99:1 in the wife's favour.

roadweary

This is where it gets confusing.....stamp duty wise....I'm told there are things you can do as "gifts" and rental income....HMRC says "Unequal beneficial interests declaration

Where spouses hold unequal beneficial interests in assets and they wish to be taxed other than 50:50 on income or gains arising on the property they will need to make an election under section 837 ITA 2007 to ensure that each is taxed on the income that corresponds to their beneficial interest."

But clearly this is a minefield....

roadweary

TrickyDicky101 wrote: »

That's not correct. The SDLT would be chargeable on a 50:50 basis but the rental income will accord to the TiC split - ie you can have it 99:1 in the wife's favour.

Hi,

What I've read agrees....not sure how you assign that split?

Any idea on the stamp duty side of things?

Cheers,
R

lovinituk

TrickyDicky101 wrote: »

That's not correct. The SDLT would be chargeable on a 50:50 basis but the rental income will accord to the TiC split - ie you can have it 99:1 in the wife's favour.

Not according to that article I linked to and other websites I have read recently. It is 50-50 unless you declare otherwise...

"The “Declaration of beneficial interests in joint property”, which is HMRC form 17, lets you tell your tax office that you want to be taxed on your actual shares of the income rather than on a 50:50 basis."

TrickyDicky101

Well of course it would be 50:50 unless you declare otherwise - that doesn't conflict with what I stated does it?

The declaration is for tax purposes. The basis of the declaration would be the Tenants in Common Deed of Trust.

lovinituk

TrickyDicky101 wrote: »

Well of course it would be 50:50 unless you declare otherwise - that doesn't conflict with what I stated does it?

Now I'm confused - first you disagreed with me now you're agreeing with me?

Have you read the article I linked to? It seems to suggest that "the income from rental is still split 50-50 for tax purposes" is correct as I posted.