Buy to let mortgage - tax relief

Hi,

My wife and I jointly own a second property and split the income on our tax returns 50/50.

She doesn't earn enough to pay tax, but I am a top rate tax payer.

We have a mortgage on the bu to let that comes out of a joint account and is in joint names.

For tax purposes, can I claim the mortgage relief alone (i.e. not splitting it 50/50) as I pay the mortgage from my salary or does the tax max assumer we both jointly pay the mortgage even though my wife doesn't earn.

Hope that makes sense?

Comments

  • Pennywise
    Pennywise Posts: 13,468
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    If the property is jointly owned equally, then ALL the income and expenses have to be split equally. How they are paid and where the income is banked is irrelevant. Your respective tax returns should be identical on the property pages.
  • pjcox2005
    pjcox2005 Posts: 1,014
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    edited 13 December 2018 at 5:23PM
    I believe you could change the legal title to be owned with a specific split but it would change the capital gains position on any sale.


    You may actually want to ask the question of whether you are claiming too much interest expense being a high rate tax payer as this is already being phased out.
  • 00ec25
    00ec25 Posts: 9,123
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    you are married so the rules are as follows:

    A) if you own the property as Joint Tenants then you must split income and expenses 50/50, There is no alternative

    B) if you own the property as Tenants in Common you must use 50/50 unless you have 2 additional things in place:
    1. you really own the property in unequal shares and have that documented via a declaration of trust
    and
    2. you have informed HMRC of that fact using their Form 17


    as mentioned above - are you aware of the restrictions on interest claims for higher rate taxpayers? Since your wife is not a higher rate taxpayer, it will be impossible for your tax bills to be identical since yours will be higher as you cannot get full tax relief on your interest
  • BGM
    BGM Posts: 33
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    00ec25 wrote: »
    you are married so the rules are as follows:

    A) if you own the property as Joint Tenants then you must split income and expenses 50/50, There is no alternative

    B) if you own the property as Tenants in Common you must use 50/50 unless you have 2 additional things in place:
    1. you really own the property in unequal shares and have that documented via a declaration of trust
    and
    2. you have informed HMRC of that fact using their Form 17


    as mentioned above - are you aware of the restrictions on interest claims for higher rate taxpayers? Since your wife is not a higher rate taxpayer, it will be impossible for your tax bills to be identical since yours will be higher as you cannot get full tax relief on your interest

    These restrictions you refer to, do you mean the relief is limited to 20% but the tax bill is 40% or 45% depending on tier? Or something else?

    I am currently considering route #2 as my wife is a 20% tax payer, and we would save the potential stamp duty charge after a year..
  • 00ec25
    00ec25 Posts: 9,123
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    BGM wrote: »
    These restrictions you refer to, do you mean the relief is limited to 20% but the tax bill is 40% or 45% depending on tier? Or something else?

    I am currently considering route #2 as my wife is a 20% tax payer, and we would save the potential stamp duty charge after a year..
    read the rules for yourself...
    https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies
  • You can make a declaration that the income is not split 50:50. It's in the self assessment guidelines for property
  • 00ec25
    00ec25 Posts: 9,123
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    You can make a declaration that the income is not split 50:50. It's in the self assessment guidelines for property
    not sure why you are repeating only part of the relevant info - I explained the options in post #4

    your comment misses out the relevant extra context applicable for option b) - the circumstances under which you can claim unequal shares
  • BGM
    BGM Posts: 33
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    edited 21 December 2018 at 9:03AM
    00ec25 wrote: »

    yes, your answer is (sort of) helpful, but a more direct answer to the specific question would be even better.

    personally, i have read that document a number of times... but it never hurts to make sure re: some specific things.

    so, to try again... is that specifically what you were referring to, or were the 'restrictions' that you had in mind something different?
  • Pennywise
    Pennywise Posts: 13,468
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    BGM wrote: »
    yes, your answer is (sort of) helpful, but a more direct answer to the specific question would be even better.

    personally, i have read that document a number of times... but it never hurts to make sure re: some specific things.

    so, to try again... is that specifically what you were referring to, or were the 'restrictions' that you had in mind something different?

    Which bit of that webpage (as linked) are you querying? There's a lot of it, and presumably you have a specific bit that you're not sure about?
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