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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4943
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I own two buy to let houses in my name and i'm a higher rate

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I own two buy to let houses in my name and i'm a higher rate tax payer. My girlfriend is my long term partner and mother of our child but we are not married. She earns considerably less than the higher rate tax threshold. Can we do anything to a) count the income from my investment houses as hers to incur only basic rate tax and b) do the same for the savings accounts I'm storing the profits in to pay off the interest only mortgages? What options do we have And is getting married a full or partial solution?
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

If you were married couple and living together, then transfer of a share of property would not result in any capital gains tax as transfer of assets between spouses are tax neutral... (the asset/investment is deemed transferred at cost price).

HMRC rule on property income when property is in joint names is and I quote "

If you live together with your spouse or civil partner, we normally treat income from property held in your joint names as if it belonged to you in equal shares and tax each of you on half of the income, regardless of actual ownership."

If you wish this to be taxed on a different basis (known as actual basis) i.e. 60:40; 80:20 etc .etc. then you need to complete a Form17 and also provide evidence in a form of a declaration or deed that your beneficial interests in the property are unequal.

More information on this and a link to download Form 17 is here

https://public-online.hmrc.gov.uk/lc/content/xfaforms/profiles/forms.html?contentRoot=repository:///Applications/SpecPersTax_iForms/1.0/17&template=17.xdp


I am also providing a link to some guidance notes from ACCA here

http://www.accaglobal.com/zm/en/technical-activities/technical-resources-search/2014/october/jointly-owned-property-form-17.html

The alternative is to transfer a share of the property to your girlfriend and any gain resulting from it would be
- chargeable to CGT
- regarded as a potentially exempt transfer for inheritance tax purposes and the seven years rule would apply. If you survive for 7 years after making the gift, the gift is exempt from IHT irrespective of the value.

She as a recipient of the gift would receive it free of tax as there is no tax on gifts in the UK.

You could then decide what the income sharing ratio is and split rental income accordingly. You could apply the same rationale to the savings account and report interest received on this basis.

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

Thank you for your answer. I have a few queries please. The two properties are not currently in joint names and we are not married or in a civil partnership.

Can I still gift one or more houses to her completely (I.E. not a share but ownership)?

As we are not married and if I either have completely or have a share how would the CGT be calculated since there would be no sale and therefore no benchmark price to tax as gain?

Do we need to remortgage in joint names before we can share or gift?

Expert:  taxadvisor.uk replied 2 years ago.
Rob, thank you for your reply.

[q]
Can I still gift one or more houses to her completely (I.E. not a share but ownership)?

[a]
You can gift 100% of one of more properties to her... the gifted amount (equivalent to the value of the property/properties)) would be free of any tax in teh hands of the recipient

[q]
As we are not married and if I either have completely or have a share how would the CGT be calculated since there would be no sale and therefore no benchmark price to tax as gain?

[a]
You would use the current market value as a benchmark price to evaluate gain on transfer.

[q]
Do we need to remortgage in joint names before we can share or gift?

[a]
You are best advised to clarify this with the lender .

I hope this is helpful.
Customer: replied 2 years ago.

Thank you. To progress this and make any changes do I need to go to a tax advisor in person to get things done or can I do it myself? I.e. gifting a property or setting up a share? It sounds complex and subject to error if I try myself. What sort of fee should I expect to pay to get these things done? Then I'm done I think.

Expert:  taxadvisor.uk replied 2 years ago.
Rob, thank you for your reply.

To be honest, you are best advised to seek expert views of a solicitor dealing with property matters. He/she would make sure all ts' are crossed and is' are dotted.

It may cost you a couple of hundred pounds but it would be worth it.

I hope this is helpfiul.
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4943
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
taxadvisor.uk and 2 other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Best wishes

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