I’m looking for some advice to help me understand the implications and opportunities of the ownership structure of my investment property.
By way of background, I purchased the property in February 1997 and lived in it until June 2002 when I got married, after which it was successfully rented out to tenants. In August 2006 I moved back in for a year, during which it was my principle private residence with my wife. It has been rented out to tenants since September 2007.
I paid £78K for it 1997 and when it was first rented out in 2002, its estimated value was £230K. Market value now is about £390K.
It has a small mortgage of £50K, I pay higher rate tax and my wife works part time.
Unfortunately, we’ve been slow to spot that we can increase the tax efficiency by increasing borrowing on the property and using the increased interest as an allowable expenditure. (& moving the capital elsewhere to better use). Also, that by moving the property into joint name via a gift from me, we can also optimise in terms of the income tax position on our respective self assessments.
We are struggling to understand the current and future tax implications of making any change (ie. CGT, SDLT and income tax) but also the order and method by how we should actually do it. At one level it seems quite simple but then I have tripped up over the practical steps of making any change in terms of gifting, SDLT, tenants in common versus joint tenants etc in conjunction with getting the increased borrowing.
We have determined using various mortgage brokers that due to her modest earnings, my wife will be unable to get a mortgage in her own name so we’ll be tied together rather than putting it 100% in her name. Our current thinking is that 50/50 ownership and self assessment is probably the way to go but are open to persuasion.
Is anyone able to shed in any light on how we should go about this to be sure we’re exploring the options properly to maximise our position from here but also ensure that we do things in the right way to avoid unintended consequences? Are there future considerations we should be aware of?
Many thanks
By way of background, I purchased the property in February 1997 and lived in it until June 2002 when I got married, after which it was successfully rented out to tenants. In August 2006 I moved back in for a year, during which it was my principle private residence with my wife. It has been rented out to tenants since September 2007.
I paid £78K for it 1997 and when it was first rented out in 2002, its estimated value was £230K. Market value now is about £390K.
It has a small mortgage of £50K, I pay higher rate tax and my wife works part time.
Unfortunately, we’ve been slow to spot that we can increase the tax efficiency by increasing borrowing on the property and using the increased interest as an allowable expenditure. (& moving the capital elsewhere to better use). Also, that by moving the property into joint name via a gift from me, we can also optimise in terms of the income tax position on our respective self assessments.
We are struggling to understand the current and future tax implications of making any change (ie. CGT, SDLT and income tax) but also the order and method by how we should actually do it. At one level it seems quite simple but then I have tripped up over the practical steps of making any change in terms of gifting, SDLT, tenants in common versus joint tenants etc in conjunction with getting the increased borrowing.
We have determined using various mortgage brokers that due to her modest earnings, my wife will be unable to get a mortgage in her own name so we’ll be tied together rather than putting it 100% in her name. Our current thinking is that 50/50 ownership and self assessment is probably the way to go but are open to persuasion.
Is anyone able to shed in any light on how we should go about this to be sure we’re exploring the options properly to maximise our position from here but also ensure that we do things in the right way to avoid unintended consequences? Are there future considerations we should be aware of?
Many thanks