Tenant in Common - pay less tax?

[Sand]

Hi

I have inherited 50% of a property and will be getting a BTL mortgage to buy the other 50% and then rent out (I have looked into this to some extent)

My question is, I am a higher rate tax payer and my husband is not, I understand I can apply to the land registry to be tenants in common as say me 1% and him 99%.

Ideally I would like the house to be in joint names, ie 50/50 and then for any income be 99/1, is this possible or does then everything have to be 99/1 if i choose this way?

I also understand this is done by a trust deed carried out by a solicitor.

Not only am I looking to pay less tax but also concious of getting 2 allowances for CGT (I assume this is ok even if I only have 1% share)

Finally does anyone know if the mortgage would have to be split or does it not matter whos name it is in?

Any advice welcome

Thanks

[Trenners]

Hi Sand,

I am a landlord not a solicitor or an accountant .... here is my understanding of the situation.

"Tenants in common" rather than "Joint tenants" indicates that the ownership of the property is NOT 50 / 50. If you do not buy the property / register the property as Tenants in common then it will be deemed (by HMRC) that you own the property 50 / 50 and all income and expenditure is therefore shared 50 / 50.

The mortgage needs to be in joint names because you will jointly own the property (albeit not in equal shares - but that is all irrelevant when applying for the mortgage).

The purpose of "Tenants in common" and the subsequent "deed of trust" is to ACCURATELY reflect the actual ownership situation relating to the property. In other words - it is not meant to be used as a Tax Avoidance tool and cannot be applied retrospectively ... and HMRC also take dim view of the deed of trust being varied (to avoid tax).

So, register tenants in common, create a deed of trust and then complete the HMRC form (I think it is Form 17) declaring that the property is owned on a 99% / 1% basis. When you complete your annual self assessment returns your need to share income and expenditure according to the 99 / 1 split and you need to TICK THE BOX that asks "Do you have income from property owned jointly with someone else".

It is my understanding that a 99 / 1 split will not affect your individual CGT allowances when you come to sell the property - but I am still trying to get clarity on this (from my accountant) because, in your scenario, technically one of you will only own 1% of the property gain ... so I think that only 1% of the capital gain could be offset against your CGT allowance ... but I would be interested to hear what other forum members think about this point.

Hope that helps ....

Mark

[Sand]

Thanks Mark for your great reply, its great to bounce ideas!!