Tax on second property

saveyourboredom

Hi all,

I have owned my house for around 18 years or so and recently began renting it out, moving into a second property.

My first property is solely in my name and a friend said that if the property was in both my and my wife's names then we could take advantage of being tenants in common. She doesn't work so I could feasibly say she owns 99% of the property reducing our tax payments.

My worry is that if I added her to the ownership then the government would see this as renewing the ownership, therefore when it comes to selling we would lose any tax relief I would've built up over the past 18 years. Is that right or would it carry over?

This is all very new to me and I keep getting contradictory information.

Thanks

Pennywise

You are right to worry. You currently have 18 years' worth of main residence relief for capital gains tax, If you give a share of the property to your wife, she acquires her share based on the price you paid 18 years ago but she won't qualify for main residence for the full 18 years as she didn't own her share for the period she lived in it - all depends on the date your married, date she moved in, etc., as to just how much main residence relief she'd be entitled to. If she ends up ineligible for main residence relief, she won't get lettings relief either. By giving her a share of the property you could well be massively increasing the capital gains tax when you finally come to sell it. I'd strongly suggest that paying for an hour or two for a meeting with a qualified tax accountant would be well worth it before you go ahead, just so that someone can look at the detail and tell you the situation. Maybe that it's still worth doing, but only someone with the proper knowledge of the tax laws can confirm that once they've studied the hard facts.

saveyourboredom

Thanks so much for your help. I think a couple of hours with a tax accountant is wise