new tax implications for low income landlords

searchlight123

hi all
i apologise for asking what should be a simple question, but i just cannot get my head around the new tax rules for landlords.

kingstreet

She solely owns the let property?

You raised the deposit on your solely owned property?

How is she able to treat as an expense the mortgage interest on your home? Did you have a loan agreement drawn up?

searchlight123

the transfer of the rental has only recently been made to her name. i solely own my own house where we both live.
my real enquiry is how much tax she will pay on the rental income and whether it is best to not have the mortgage at all.
i just cannot fathom how the phasing in process will affect a lower rate tax payer.

many thanks.

saajan_12

Since the mortgage was raised solely in your name, did you loan or gift partner the money? Can she prove a loan agreement with OP and that she was paying the interest as a cost of the BTL business? This would be a prerequisite to claiming tax relief against the rent income.

As for your question, how would you raise the funds? If you have savings, are the savings paying you more interest than you are paying on the current mortgage? If you would take another loan/mortgage,, would the rates you can get be lower than the current mortgage? Pick the one with the lowest interest rate! If partner can raise funds on the flat itself, it would be easier to claim tax relief - in this case for comparison purposes, use 0.8x the interest rate here.

00ec25

is she, or is she not, named on the existing mortgage on the house that is in your own sole name? She is not an owner of the mortgaged property, but some lenders will allow non owners to be party to mortgages and her liability for the loan is the key issue that has been queried by the posts above...

the point being made is that she runs the letting business in her sole name but she cannot claim an interest charge cost against that business as the loan producing the interest cost is not in her name

Whilst it is good that a soon to be married couple talks in terms of "us", please understand that when dealing with tax there is no "us" even for married couples. Taxation is on individuals not couples, and she is the sole owner so she is the only person entitled to the rental income. "We" do not rent out anything, she does it by herself, but has no cost she can claim because the cost is not in her name.

mrsammyp

If she is a basic rate tax payer then the new rules would not effect her in anyway as she would get 20% relief.

Whether she is entitled to that relief is another question which I think everybody is trying to get at.

Crashy_Time

https://www.lettingaproperty.com/landlord/blog/2016/12/landlords-fear-a-double-hit-from-section-24-according-to-survey/

sheramber

What exactly os the position with flat?

You say first of all that she owns the flat but then you state the rental income was transferred to her recently.

Has she always owned the flat?

Or did you own the flat and transfer the flat to her? Capital Gins tax would come into play in that scenario.

Who received the rental income before it was transferred to her?

theartfullodger

tonygold wrote: »

the transfer of the rental has only recently been made to her name. i solely own my own house where we both live.
my real enquiry is how much tax she will pay on the rental income and whether it is best to not have the mortgage at all.
i just cannot fathom how the phasing in process will affect a lower rate tax payer.

many thanks.

Suggest you both ensure mortgage lender is happy with the current arrangement - it sounds, apologies, most irregular: Are you sure there's no breach of mortgage conditions?

You really don't want to find yourselves on the "Hunter" alert system for people who've been judged very irregular as regards loans and probably wouldn't be able to get mortgage or loans in future, either at all or easily at reasonably rates.
http://www.telegraph.co.uk/finance/personalfinance/borrowing/11467480/The-secret-database-blacklisting-borrowers.html
&
https://www.mortgagestrategy.co.uk/issues/18-february-2013/the-war-on-fraud/


I am of course not suggesting anything untoward has actually occurred here, but the authorities might decide it had if you don't clear matters (unless you've already done so), present the evidence, prove everything done above board as I'm confident it has been.

Property is a long-term game: Some years it's good, some bad (eg prices look like they are dropping right now, tax is getting "interesting"). Me, I'm staying in for the longer term. If you (err.. sorry - if wife..) can't afford a bad year or two it ain't the business for her, some might say.


Cheers!

Crashy_Time

https://www.theguardian.com/money/2017/may/08/london-rents-fall-for-first-time-since-2009

00ec25

Crashy_Time wrote: »

https://www.theguardian.com/money/2017/may/08/london-rents-fall-for-first-time-since-2009

Crashy, given you are such an "expert" on spotting investments how come you have not yet contributed your random google quotes to this thread? Surely a much better proposition than property if you truly believe in your own nonsense and follow your own advice? (though I doubt it as you run away as soon as there is a chance you might make money)
https://forums.moneysavingexpert.com/discussion/5647436