Letting a property when mortgage paid by Ex-Partner

Mikec1985 · 19 June 2018 at 9:35PM

Hoping for some advice on a slightly unusual letting situation, might be a little tricky to give definitive advice without all the info, but would appreciate some guidance. Basically my Partner is looking to rent out her property and then rent with me. Now the mortgage on the house she will let being paid by her ex husband as per the divorce agreement. It will be her home but really it will be joint owned to an extent and the ex husband will have the actual mortgage. He is happy for her to rent the property so no problem there. My question is just regarding the tax implications for the rent/profit received. She has no income at present and her ex partner pays the higher tax rate. So I am concerned that maybe half or all the rent/profit will be taxed via his higher tax rate? Thank you in advance I hope that is a kinda clear question.

gettingtheresometime · 19 June 2018 at 9:44PM

The ex may not have a problem but what about the mortgage company?

00ec25 · 19 June 2018 at 10:02PM

this has a very clear cut set of questions that will give a defintive answer to her tax position:

1. Does the divorce agreement (financial settlement) entitle ex husband to a share of the rental income: Yes or No?

2. If rental income is not specifically mentioned, does ex husband retain a "beneficial interest" on the property - ie will he get a cut of the money when it is sold? I suspect yes?

3. As a divorce has been legally completed, the normal rules for how income is split between a married couple obviously no longer apply. Nonetheless it would be wise to seek written confirmation from ex husband that he renounces and wish to have a share of the rental income - unless I have misread your post and he does actually want some?

4. You say the ex husband is paying the mortgage, therefore the ex wife (your "partner") cannot claim any of those costs as hers since she has not physically paid them. I assume she is no longer (?) party to a joint bank account with the ex husband from which the payments are physically made?

5. So it looks likely that ex wife will receive 100% of the rental income and have few costs to claim against that income. Therefore all of the taxable profit will be hers and she will need to declare it for tax purposes as her own income.

Anyway, even if ex husband does have a right to a share of the profits, I have no idea why you think the ex wife would pay tax at the ex husbands tax rate given man and woman have been independently taxed for decades. Wives are no longer chattels of their husbands and taxed at his rate!

Mikec1985 · 20 June 2018 at 1:28PM

Thank you, your replies, they do seem to cover a lot of the issues involved and some I hadn!!!8217;t even thought of.

We will be contacting the mortgage company today actually to get their all-important view. So skipping to the points 4 and 5 where I think you have managed to get to the hub of the issue. I think you are spot on actually, I knew there was going to be an issue but couldn!!!8217;t quite think of what it was. So my partner will receive and be taxed on the Rent (which is good) but this will not offset any mortgage interest or fees (which is bad).

So in practice as she has no earned income at present, would she just be taxed at 20% on the rental income above £11,600 ish?

Or will she be taxed at 20% for the full amount of Rent (minus a few running cost). So does the tax free income of £11,600 still count and are my calculations correct?

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Letting a property when mortgage paid by Ex-Partner

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