Maximise partners profits

[Matthew]

I am looking to get a buy to let and since my girlfriend has helped me renovate my last property we are thinking of doing this together.

I have the deposit, but would like to maximise the profit from the property on her side as a lower band tax payer, what are the best ways of handling this?

Thanks,

Mat.

[plym77]

Hi Mat

As you are unmarried your planning opportunities are a little more limited. In an unmarried couple this simplist way of transferring a larger share of the income to your girlfriend is by her owning a larger part of the property - ie. if she owns 80%, she will be entitled to 80% of the profits. However, be careful as you are not just giving away the right to income, you are giving away capital too, which you should consider carefully - particularly if you are soleley supplying a cash deposit.

I would suggest that if you are going for ownership of something other than 50:50 that you own as Tenants in Common (your solicitor can sort this), then in future years it is possible to quite easily adjust the capital/profit proportions, depending on income levels (but remember as an unmarried couple that you could be subject to CGT/SDLT on gifts of proportions of the property - depending on the figures - so think hard about the ownership proportions before purchase as this will be your starting point) by arranging for a Declaration of Trust to be prepared by a solicitor, avoiding the need to keep changing the details iwth land registry.

There are more complicated options, which require specific advice (which I can offer) however, if you just have the one property and your profit element is not substantial, I would suggest the route above is the easiest.

Should you require any specific tax advice, please do feel free to email me.

Kind regards

Sherena

[Matthew]

Thanks Sherena,

So it is legally Ok for me to have my share in the property as 20% and hers as 80% although I am putting the money in. Would this not count as a gift and be taxable?

I do intend to ask her to marry me in the near future, so I guess it will be easier then, but I am still saving up for the Tiffany ring and have a way to go :-)

Thanks,

Mat.

[plym77]

Hi Mat

The only problem I can forsee is if you take the mortgage in your name only and yet put a share of the ownership in to her name. A mortgage lender probably wouldn't like that. If this is the case, I would suggest that another way around it is to buy the property and immediately put a share in to her name by Declaration of Trust (a legal document prepared by a solicitor - avoids the need to change at land registry.

Any gift of a share of capital of the property is a Potentially Exempt Transfer for Inheritance Tax purposes and as such, in thoery you need to have a wealth of in excess of £285k and die withing seven years for any tax to be paid so I don't think this is to much of an issue at the moment. However, as said in my previous email, a gift of a share of the property once in increases in value could result in CGT becoming payable.

When you do get married things to become easier with regard to planning.

Good luck with the proposal!

Regards

Sherena

[Matthew]

Hi Sherena,

The mortgage for the new place is going to be in both our names, so it sounds like it should be OK.

Thanks again for you help,

Mat.

[plym77]

no problem

sherena