tax on jointly owned buy to let ??

cloz

Don't know if anyone can give me some advice but here goes....
my parents are planning to buy a 2nd property and let it out to tenants, they have paid off the mortgage on the house they live in so will use property 1 as security for property 2. The rent for property 2 will be paid into my mums account. When it comes to paying tax will both of them be taxed as property 2 will be joint owned? or just my mum as the cheque is paid to her?
What mum is hoping is that the income from house 2 is counted with her wages as her income rather than going with dads wages with his income (which would take him over into a higher tax bracket) or as they are married do they both have to take income from 2nd property into consideration concerning tax?
hope this makes sense!!! ??? ???

MarkyMarkD

Either buy it in her sole name (in which case the income is hers) or buy in joint names and declare it to be held in unequal shares. I can't see any point buying it jointly, though, to be honest, in these circumstances.

cloz

Thanks, needs to be bought i joint names as she can't get the full mortage on her own.

MarkyMarkD

The loan is secured on their main property, which is in joint names - fine.

No reason why that makes the second property be in joint names.

Elizabeth_T_2

I read the first post with interest, am in the same position . We now own a second, mortgage free house jointly, daughter & family rent it (nominal rent), I know we will have to declare rent and pay tax on it, I assumed I would declare the income on my tax return as I am a low earner, didn't think about my husbands!oops!! can anyone clarify this please.....

vansboy

Friends of ours in BIG tax problems, not just due to the properties they let out, but....

One of the things they did wrong, was NOT to interpret the income to be split 50/50. as far as the IR officer is concerned, it needs to be considered this way, for tax purposes.

VB

Robert_Sterling_3

We now own a second, mortgage free house jointly, daughter & family rent it (nominal rent), I know we will have to declare rent and pay tax on it, I assumed I would declare the income on my tax return as I am a low earner, didn't think about my husbands!oops!! can anyone clarify this please.....

1. I think you should charge the tenants a fair market rent. This could mean you would pay more income tax.

2. You can each give your daughter up to £3,000 a year [ Total £6000 ] to help her pay the rent.

3. I am surprised that the house is not in your daughter's name for Capital Gains Tax purposes.



This is not professional advice. It is like something you misoverheard in a pub.

MarkyMarkD

Friends of ours in BIG tax problems, not just due to the properties they let out, but....

One of the things they did wrong, was NOT to interpret the income to be split 50/50. as far as the IR officer is concerned, it needs to be considered this way, for tax purposes.

VB

I should clarify a number of postings I've made on this subject.

You cannot just "decide" that property is owned in any way other than 50:50.

If the property is held in joint names, then by default it will be considered to be 50:50.

But if you wish the property to be held in different proportions, including 1:99 if you so choose, you CAN do so. But this would require:

(1) the legal documentation to say this from when you purchased, or you to susbequently enter into a legal agreement to transfer part of your 50:50 share to the other party; and
(2) that you complete the necessary IR form to notify them that the asset is held disproportionately.

If you have complied with the above, the IR can't "deem" it to be 50:50 - it factually is NOT held in those proportions. But you have to go through the necessary hoops.

Unless you need to hold it in joint names, it's (IMHO) a lot easier for the BTL property (or similar asset) to be owned 100% by the low-income-earning spouse.