CGT when selling Tenants in Common second property

OUNN

Hi folks,

It's something I'm trying to wrap my head around. My job is being moved away from where we currently live.

Rather than move the kids out of school etc at the moment, we're looking at buying (if we can afford it) a second property for me to live in for the 5 days while I'm away for work.

There is possibility in the future we may be in a position to rent out the property (If I can ever get my job moved back).
I'm a higher rate tax payer, the wife isn't. Because of the way rental taxes etc are moving, it would be beneficial if a greater share of the rental income was apportioned to the wife. So we're looking at a Tenants in Common split on the new property of say 90/10. (need both on the land registry so we can both be taken into account for the mortagage calculations)

If in future the house is then sold, it hasn't been a main residence (just one I'm using while working, and then possibly a rental). It will be subject to CGT (if the value has increased) - will the CGT be assessed as per the Tenants in Common split, or could we use both the Wife and my own CGT allowances to their fullest?

I think what I've written makes sense.
But if the question isn't obvious I apologise!

Thanks in Advance!

00ec25

as you are married then you can alter the ownership proportions between the pair of you as many times as you like without triggering CGT

so, bearing in mind the mortgage requirements, why 90/10, why not the more "usual" 99/1 or any combination that makes senses year on year?

the only caveat is make sure you do the final share alteration a significant (eg. 1 year) period before you start to market the property for sale. HMRC have the power to ignore a share alteration if they decide the only reason for doing it was to reduce the tax exposure for the higher taxpayer. By doing it well in advance you then have a period where the rental income split is not as favourable as it was and thus no way HMRC can claim the shares were changed just for CGT reasons since the higher taxpayer would have paid more income (ie. rental) tax for a period prior to sale

when you do sell then the gain is split according to the shares at point of sale. Yes therefore it is better to ensure that the lower value is at least equal to the prevailing allowance that year - hence the advantage of the "free" alterations leading up to the sale

also bear in mind you do not need to alter the TIC split each time, you merely do a new declaration of trust and send a revised Form 17 to HMRC. You are taxed on your beneficial ownership, not on your legal ownership share

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg11730

https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

OUNN

That's as comprehensive a reply as I could've hoped for!

Thank you for taking the time to reply!