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Sam
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Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I'm considering purchasing two buy to let properties. These

Resolved Question:

Hello,
I'm considering purchasing two buy to let properties. These properties would be on joint mortgages with my wife.
As a 40% tax rate payer it has been proposed to me that a significant proportion of the income from these properties could be attributed to my wife who is currently below the £11,000 threshold. However, a proportion of the income would have to be allocated to me.
Could you let me know the rules on this please?
Submitted: 8 months ago.
Category: Tax
Expert:  Sam replied 8 months ago.

Hi

Thanks for your question

As it will be in joint names, then up to 50% of the rental income (and costs) can be attributed to your wife, with the other 50% attributable, to you unless it can be shown that your wife funds a greater share than 50% through savings (as you advsie she has no income)

This is the only way that an election to change the share could be made

If she is held on the title deeds (and buy to let loan/mortgage) just in name only - then HMRC will not accept more than 50% share - however once the loans no longer sit against the properties - then of course you can then make a title transfer to her sole name - thereby allowing her to be sole owner and sole recipient of rental income

Do let me know if I can assist further

Thanks

Sam

Customer: replied 8 months ago.
Sam,Thanks for your reply. My wife currently earns £100/week (estimated £4,800 a year) as a trainee hairdresser. Whilst I am the major wage earner it is essentially this extra income that has prompted us to consider the buy to lets. Therefore, could an election to change the share be proposed? If so how could we demonstrate this (currently we have primarily joint finances therefore to prove or indeed dis-prove who pays for what would be difficult), what would be the maximum percentage attributable to my wife and how would we demonstrate any attributing of the income?Regards
Expert:  Sam replied 8 months ago.

Hi

Thanks for your response

You can only change the share proportion if the way in which the loan is made/given actually represents her as the greater share owner of the property - which does not seem to be the case here. How would you be able to show that this was the case ?

Thanks

Sam

Customer: replied 7 months ago.
Sam,Thanks for your reply. To answer your question I don't know. I was hoping you could tell me.I would have to discuss with my mortgage advisor if there was any flexibility in how the loan was presented/termed. In terms of the outgoings and incomings we would probably open a new account which could show my wife funding more than myself. However, as the intention would be for the rental income to exceed and therefore fund the outgoings my wife and I wouldn't technically be funding anything as the whole thing would be self funding.As for the profit after costs we could demonstrate my wife taking a greater proportion.If the loan could show my wife as the greater share owner is there any limitation on the proportions?Regards
Expert:  Sam replied 7 months ago.

Hi

Thanks for your response

I can only advsie you how tax law is applied and why - not how to evade it! And opening an account where more outgoings are made is irrelevant as one would expect the rent coming in to cover the costs going out. Its about showing that your wife either through a cash contribution of her own or from her level of income could actually be proven to show as as the greater contributor to this purchase itself.

If the loan can show that she is a greater share holder due to her contribution to the purchase OR of she puts down a deposit from her own funds then yes you can use this to provide evidence of a form 15 election with HMRC to show that this is not a straight forward 50/50 split and ask for the actual apportionment to be applied

Link here for that election

https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

But what you cant do is just change the legal split to suit the rental income ratio to you needs - this is tax evasion and if I encouraged you to do that. I am sure you can appreciate I would not be serving you well! As its you that would pay the penalties and tax underpaid when HMRC challenge any election without the evidence to support it.

Let me know if I can assist further, but if you have all you need, it would be appreciated if you could rate me for the level of service I have provided (or click accept)

Thanks

Sam

Sam, Accountant
Category: Tax
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Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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