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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4428
Experience:  FCCA FCMA CGMA ACIS
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My partner and I are tenants in common and have 66.6%/33.3%

Customer Question

My partner and I are tenants in common and have 66.6%/33.3% split on the equity in my favour. If we sell the house (there's no mortgage) and buy another in my name only, can we purchase a second property in her name (with or without a mortgage) and as she only works P/T can we offset some of the rental income against her tax allowance?
The ultimate goal is that a rented out property would ultimately be there to sell off to give our 2 children (aged 8 and 4) a decent start in life.
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

In a word, yes; no problem. Be careful though of the rental income. It can certainly absorb the balance of her personal allowance. Please remember that when the rented property is ultimately sold any gain will be subject to Capital Gains Tax (CGT), but there would be an entitlement to Lettings Relief (up to 40K) and the Annual Exempt Allowance (11K) which would reduce the gain considerably, with luck!

There is an entitlement to Private Residence Relief at 100% on any gain made on the sale of your existing house so there is no CGT to worry about there. The same pplies to the new purchase as it will be a sole or main domestic residence which she occupies. The gifts between you which will be needed to do these transactions are outside the scope of UK taxation.

I do hope I have helped, please come back to me if you have any follow jup queries.
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Customer: replied 3 years ago.

Hi Keith


 


Just not quite sure if we face an issue with her 33% of the sale of our existing home? What are the implications if upon completion of a sale if:


1. She merely transfers the cash to me?


2. She banks the cash and gives it to me later?


3. She banks the cash and uses some of it as a deposit against a buy to let property in her name?


 


Thanks


AL

Expert:  bigduckontax replied 3 years ago.
Actually AL it doesn't matter the slightest. All the gifts to you are outside the scope of UK taxation so whichever way she plays it the answer is the proverbial lemon!

Personally I would be inclined that she bank the cash and either gives it to you later or use it as a deposit.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.