Rental income to one owner only

DWM345

DWM345 said:

"It doesn't matter where the mortgage is secured, the interest can still be considered to be as a result of buying the rental property. Though current regulations mean that the interest payments are restricted to the basic rate, they should still be included on your tax self assessment."

I didn't know that, excellent news. Glad now, that I came on here asking dumb questions.

I'm not quite sure how that works. So if I recieve over £50k in pension and thus on 40% tax ( I withdrew my SIPP) does that mean I only get half the relief that my share of the mortgage payments entitle me to ?

anselld

DWM345 said:

DWM345 said:

"It doesn't matter where the mortgage is secured, the interest can still be considered to be as a result of buying the rental property. Though current regulations mean that the interest payments are restricted to the basic rate, they should still be included on your tax self assessment."

I didn't know that, excellent news. Glad now, that I came on here asking dumb questions.

I'm not quite sure how that works. So if I recieve over £50k in pension and thus on 40% tax ( I withdrew my SIPP) does that mean I only get half the relief that my share of the mortgage payments entitle me to ?

You are entitled to relief at 20%, same as anyone else.  That has been the case for several years now.

sheramber

DWM345 said:

DWM345 said:

"It doesn't matter where the mortgage is secured, the interest can still be considered to be as a result of buying the rental property. Though current regulations mean that the interest payments are restricted to the basic rate, they should still be included on your tax self assessment."

I didn't know that, excellent news. Glad now, that I came on here asking dumb questions.

I'm not quite sure how that works. So if I recieve over £50k in pension and thus on 40% tax ( I withdrew my SIPP) does that mean I only get half the relief that my share of the mortgage payments entitle me to ?

The interest payment claim  be split in the same percentage as your share of the rental income. 

Either 5o/50 or whatever percentage you decide on. 

silvercar

DWM345 said:

DWM345 said:

"It doesn't matter where the mortgage is secured, the interest can still be considered to be as a result of buying the rental property. Though current regulations mean that the interest payments are restricted to the basic rate, they should still be included on your tax self assessment."

I didn't know that, excellent news. Glad now, that I came on here asking dumb questions.

I'm not quite sure how that works. So if I recieve over £50k in pension and thus on 40% tax ( I withdrew my SIPP) does that mean I only get half the relief that my share of the mortgage payments entitle me to ?

Yes. This restriction can make it very expensive to have high mortgage expenses on a BTL.

Basically you are paying 40% tax on the profit of the rental income but only being allowed 20% relief on the mortgage interest. The way it is calculated means that people are making a loss on what would otherwise be a profitable venture, if expenses were netted off the income before tax.

DWM345

Our other option is to transfer the property from me and my wife to just her, which can be done by completing from TR1 and sending it to Land Registry. I think these are the things I need to submit to Land Registry:-

Form AP1 - Application to change the register
Form TR1 - Transfer of whole of registered title for a private individual
iD1 - Certificate of Identity (needs signing by Solicitor or similar)
Land Registry fee £100

This looks reasonably straightforward or do I need to pay a solicitor £695 +vat to do it for me ?

Are there any obvious pitfalls ?

All help greatly appreciated.

silvercar

As you are married you can use  this form to split the income in whichever way you choose. 

“ If you live with a spouse or civil partner and have income from property you jointly own, you’ll normally be taxed on an even split of the income between you.

Use this form if you want to change the split of income to your actual share of ownership.

You’ll also need to provide evidence that your beneficial interests in the property are unequal, for example a declaration or deed.”

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

silvercar

DWM345 said:

DWM345 said:

"It doesn't matter where the mortgage is secured, the interest can still be considered to be as a result of buying the rental property. Though current regulations mean that the interest payments are restricted to the basic rate, they should still be included on your tax self assessment."

I didn't know that, excellent news. Glad now, that I came on here asking dumb questions.

I'm not quite sure how that works. So if I recieve over £50k in pension and thus on 40% tax ( I withdrew my SIPP) does that mean I only get half the relief that my share of the mortgage payments entitle me to ?

Basically, yes. Though your use of ‘entitle me to’ is really ‘that I thought I would be entitled to, if mortgage interest was treated just like any other expense’. 

It’s a pain, because you are taxed on your profit excluding the mortgage interest as an expense and then allowed the interest as an expense restricted to the basic rate of tax only.