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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Tax on Buy to Let – Married Couple I own a house worth 1,100,000

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Tax on Buy to Let – Married Couple
I own a house worth 1,100,000 in London which I rent out. I am re-mortgaging from one lender to another and will increase borrowing from 480,000 to 620,000. I want to share the ownership of the property with my wife. This for tax reasons as I understand that even if she only owns say 1% then the HMRC default position is to treat the rental income as 50:50 for tax purposes. (Wife is non taxpayer - I am highest rate)
So far so good.
However I have received two dramatically different interpretations of the stamp duty liability for the transfer(from two conveyancers). What would the stamp duty be?
Also – am I doing this right or missing a commonly used and legal tax advantage? I just want to share the income/tax with my wife (or maybe
thanks
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Has the property ever been your main home but not that of your wife?
Customer: replied 1 year ago.

we moved in together when I bought it and lived in it for 4 years but the ownership was 100% mine. We were not married.

then 18 months ago we bought another home in joint names, moved in, got married and I started letting the first one.

Expert:  TonyTax replied 1 year ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 1 year ago.
Hi again.

If you transfer a property or an interest in that property to another person, there will be no stamp duty land tax to pay so long as there is no exchange of cash involved or no transfer of mortgage responsibility. Take a look here for some example scenarios.

It would seem to me that if you become 50:50 owners after the remortgage to £620,000, then there will be stamp duty to pay on £310,000 (£620,000 @ 50%) which would equate to £5,500. I used the calculator here to compute the charge.

As the transfer into joint names will occur whilst the property is not the main residence of either of you, the property will not have been your wife's main home at any point during her ownership of it (unless you move back in) and, therefore, she will not be entitled to any main residence relief or letting relief on her share of any gain should you sell it in the future. Take a look here for confirmation of that.

I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 1 year ago.
I have to leave my desk for about 30 minutes but I will be back to answer any follow up questions you may have.
Customer: replied 1 year ago.

Hi

I thought I posted follow up question but maybe I forgot to hit send. My question is.....

Is there a way my wife and I can share ownership me:her 99:1 without her going on the mortgage at 50% and attracting that awful SDLT and compromising the main residence relief which I expect 4 year's worth. Perhaps I am asking for the best of three worlds

1) I want wife to have 50% of rental income and associated income tax

2) I want to transfer to my wife only 1% and this pay SDLT on 1%

3) I want her 1% ownership documented for capital gains tax and thus I will still get 99% of main residence relief.

Robert

Expert:  TonyTax replied 1 year ago.
I think the term is "have your cake and eat it".

1 The rental income can only be split 50:50 if your wife has a share of the property. Unless you tell HMRC by completing a form 17 of the exact ownership proportions of a property where it is jointly held in which case the rental income will be split according to the actula ownership proportions, HMRC's default split of rental income is 50:50.

2 You would need to clear that split with your lender. If it can be done such that your wife is only responsible for 1% of the mortgage which the lender may not agree to, then the SDLT will be based on that. Whether a property is held as joint tenants or tenants in common may have an impact on the viability of such a proposition.

3 This may cause a problem with HMRC when you sell as the rents will have been split 50:50. You would need to have a deed of some sort to prove ownership proportions as those aren't shown on the title deeds.

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