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Sam, Accountant
Category: Tax
Satisfied Customers: 7520
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I own two leasehold BTL flats in Southwark (London).

Customer Question

I own two leasehold BTL flats in Southwark (London). After reading this article I decided to add my wife’s name to the mortgages. I am high rate taxpayer and my wife has no income.
I understand the legal process: obtaining your lender’s consent, legal searches and registering the deed.
After some initial inquiries I understood that the article is not entirely precise when it comes to share split and “joint tenancy vs tenancy in common”. I understand what the legal implications are, however I would like to know what is the most tax efficient way to go ahead. To be more precise:
• registering the deed as “joint tenants” or “tenant in common”
• splitting the ownership 50/50, 99/1, 10/90, 75/25
• what to do during the financial year (example: Declaration of beneficial interests in joint property and income (form 17))
Needless to say I want to be able to allocate as much rental income as possible to my wife to minimize the tax liability. At the same time I would like to retain at least 50% of the property, but it is not the deal breaker.
Please help me.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi Thanks for your question Its not enough to add your wifes name to the mortgages - this must also be reflected in the deeds too. However its essential that I advise that as a married couple, then HMRCs viewpoint will be that as you appear to be the one who has secured and paid for the initial purchase costs since the purchase date and since that time for rental income - then the best you can ever get HMRC to accept will be a 50:50 split both now and for future tax years (including the capital gain position on any disposal) You will be treated as joint tenancy in law as you each own the whole property and as husband and wife will (one would assume) leave each of your shares to each other) - whereas tenancy in common which applies in all other arrangements sees each owner owning their percentage share of the property and free to leave their share to whomever they choose. (although there are ways to alter this through law!) But if HMRC are instructed to accept your situation is anything other than 50:50 then they will ask questions as to how these ventures were funded to see whether you can substantiate a claim say 90:0 in your wife's favour.MY expert advise (ex HMRC and now a practicing accountant) by all means add her to the deeds (and mortgage) but claim just a normal spousal split at 50:50 each Let me know if I can assist further Thanks Sam