Tax Savings for Landlords

Crashy_Time

Adstix wrote: »

I apologise for assisting in the thread going a bit off topic, you're right, I have !!!!!! all in the way of advice for the OP. Just get frustrated with the "HPI forever" narrative, as if it's just a given that it's a good thing...

Yep, getting much harder to push the narrative now though, which in it`s own way is quite amusing, but I think a lot of people are coming round to the fact that big debt for basic shelter is a very very bad idea (unless you are a banker or bankers pet politician)

The_Palmist

00ec25 said:

The_Palmist wrote: »

Hi MSE,

Landlord with 1 property, we kept the house as a university fund for kids and have worked hard to make ends meet. We have made no profits "we" have not, you have, given the * statement below and with the rule changes I will be making a small loss.

I am in higher tax bracket.

Appreciate there is little sympathy for landlords and government doesn't see them as potential vote banks.

Rented house is * in only my name* and my wife doesn't work.

Is there any way I can save on tax or make rental income her income so her tax allowance come in to play. yes, it is actually pretty standard stuff

All other ideas and suggestions welcome.

Thanks in advance

as sole owner, she cannot have any rent income in her name until you "give" her an entitlement to it - technically that means making her a beneficial owner

as you are (legally) married, there are specific rules... she must have a share of the ownership which means you need to convert the ownership to Tenants In Common (do NOT do Joint Tenants)

once you have done that, she is then entitled to a definable share of the income. The TIC share can be set at whatever you want it to be. The rules then require:
a) a Declaration of Trust documented stating your respective income shares
b) a Form 17 completed and sent to HMRC
https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

Because you are married, you can vary the above as many times as you want without triggering any capital gains tax for either of you. Obviously when you do finally sell up each of you will be liable for CGT on your respective share of the property

From what you have written the property is mortgaged, naturally therefore you will need to add her to the mortgage and sort out with the lender whether they will allow that in the first place and /or change the rate as a result.

Note
She absolutely cannot declare the income as her personal income for tax purposes unless you do the above

see Form 17 page here:
https://www.deedoftrust.co.uk/hmrc-guidance/

Thanks and I am really sorry I missed this rather crucial piece of advise. The thread took another direction and I had just had enough.

greatcrested

The_Palmist said:

00ec25 said:

The_Palmist wrote: »

Hi MSE,

Landlord with 1 property, we kept the house as a university fund for kids and have worked hard to make ends meet. We have made no profits "we" have not, you have, given the * statement below and with the rule changes I will be making a small loss.

I am in higher tax bracket.

Appreciate there is little sympathy for landlords and government doesn't see them as potential vote banks.

Rented house is * in only my name* and my wife doesn't work.

Is there any way I can save on tax or make rental income her income so her tax allowance come in to play. yes, it is actually pretty standard stuff

All other ideas and suggestions welcome.

Thanks in advance

as sole owner, she cannot have any rent income in her name until you "give" her an entitlement to it - technically that means making her a beneficial owner

as you are (legally) married, there are specific rules... she must have a share of the ownership which means you need to convert the ownership to Tenants In Common (do NOT do Joint Tenants)

once you have done that, she is then entitled to a definable share of the income. The TIC share can be set at whatever you want it to be. The rules then require:
a) a Declaration of Trust documented stating your respective income shares
b) a Form 17 completed and sent to HMRC
https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

Because you are married, you can vary the above as many times as you want without triggering any capital gains tax for either of you. Obviously when you do finally sell up each of you will be liable for CGT on your respective share of the property

From what you have written the property is mortgaged, naturally therefore you will need to add her to the mortgage and sort out with the lender whether they will allow that in the first place and /or change the rate as a result.

Note
She absolutely cannot declare the income as her personal income for tax purposes unless you do the above

see Form 17 page here:
https://www.deedoftrust.co.uk/hmrc-guidance/

Thanks and I am really sorry I missed this rather crucial piece of advise. The thread took another direction and I had just had enough.

Sometimes on a public forum you have to wade through cr*p to find a diamond.

Luckily, you've found it!

A critical question was why the property is in your name, and you've answerd that.

Obviously if it were wholly or partially in your wife's name, her tax status would be of benefit to you (jointly as a couple).

It's just a question of the mechanism for getting it into her name ie with the lender and title registration.

The_Palmist

greatcrested said:

The_Palmist said:

00ec25 said:

The_Palmist wrote: »

Hi MSE,

Landlord with 1 property, we kept the house as a university fund for kids and have worked hard to make ends meet. We have made no profits "we" have not, you have, given the * statement below and with the rule changes I will be making a small loss.

I am in higher tax bracket.

Appreciate there is little sympathy for landlords and government doesn't see them as potential vote banks.

Rented house is * in only my name* and my wife doesn't work.

Is there any way I can save on tax or make rental income her income so her tax allowance come in to play. yes, it is actually pretty standard stuff

All other ideas and suggestions welcome.

Thanks in advance

as sole owner, she cannot have any rent income in her name until you "give" her an entitlement to it - technically that means making her a beneficial owner

as you are (legally) married, there are specific rules... she must have a share of the ownership which means you need to convert the ownership to Tenants In Common (do NOT do Joint Tenants)

once you have done that, she is then entitled to a definable share of the income. The TIC share can be set at whatever you want it to be. The rules then require:
a) a Declaration of Trust documented stating your respective income shares
b) a Form 17 completed and sent to HMRC
https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

Because you are married, you can vary the above as many times as you want without triggering any capital gains tax for either of you. Obviously when you do finally sell up each of you will be liable for CGT on your respective share of the property

From what you have written the property is mortgaged, naturally therefore you will need to add her to the mortgage and sort out with the lender whether they will allow that in the first place and /or change the rate as a result.

Note
She absolutely cannot declare the income as her personal income for tax purposes unless you do the above

see Form 17 page here:
https://www.deedoftrust.co.uk/hmrc-guidance/

Thanks and I am really sorry I missed this rather crucial piece of advise. The thread took another direction and I had just had enough.

Sometimes on a public forum you have to wade through cr*p to find a diamond.

Luckily, you've found it!

A critical question was why the property is in your name, and you've answerd that.

Obviously if it were wholly or partially in your wife's name, her tax status would be of benefit to you (jointly as a couple).

It's just a question of the mechanism for getting it into her name ie with the lender and title registration.

I remember walking in to Halifax branch earlier this year and they just blankly refused to add a name. I called them tonight and they have said yes it is possible and will get someone to call me back. Unfortunately for me between me looking in to this and now I have lost vital time which is going to hit me in tax. 

haras_n0sirrah

Does a solicitor have to be involved to vary the ownership into joint names (I'm in a similar position but can clear the small mortgage so no lender to worry about). House in my sole name as owned it before meeting husband but husband now no longer working. Been thinking about doing this myself so useful thread for me 

noitsnotme

Crashy_Time said:

The_Palmist wrote: »

You are absolutely right, call me old fashioned, I would rather have the capital tied up in land bricks and mortar.

Could get very stressful though if the market seizes up, as it is doing now?

There’s another 18 months you got it wrong.  Never mind, you might get it right this time... maybe 🤷‍♂️

The_Palmist

I have had a chat with Halifax mortgage advisor this morning, before I rented the property out, I was on a residential mortgage fixed till April 2023 at 2.5% and Halifax gave me consent to lease.
They said to add my Mrs will be like a new mortgage application and I will need to pay £2k+ for early exit from fixed deal. 
So taking in to account the cost of early exit, cost of new mortgage including any fees etc. it is not looking very efficient to do anything till 2023 :-(

The_Palmist

haras_n0sirrah said:

Does a solicitor have to be involved to vary the ownership into joint names (I'm in a similar position but can clear the small mortgage so no lender to worry about). House in my sole name as owned it before meeting husband but husband now no longer working. Been thinking about doing this myself so useful thread for me 

from what I have read you can DIY but the costs are not so high so be on the safe side and involve a solicitor. Landlordzone has got some good info.

theartfullodger

Save tax by reducing rent.  Job done!

steampowered

You should see BTL as an investment. Not as an excuse to sentimentally keep the old house.

The fact that you are making a loss on this suggests it is a bad investment. You should consider:

- Selling the property, and instead buying somewhere with a higher yield (though this could mean SDLT).

- Selling the property, and instead putting the money into a stocks & shares ISA (which generates tax free returns) or boosting your pension (which will give you a 40% top-up from the government as you are a higher rate tax payer). 

As you are a higher rate tax payer, making the most of your S&S ISA allowance and the tax relief on pension contributions is going to be far more profitable than anything BTL can offer.