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djrwood

Anyone know much about deeds of trust and stamp duty?

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Looking for some advise before I go to see an accountant. I’ve got a second house which is a mortgaged buy to let. The house and mortgage is solely in my name as I owned it before I met the missus and subsequently got married.

the recent changes in interest which can be offset against the income plus some fortune in work circumstances mean I am now getting battered in tax. My wife only works part time so has a few k spare of her tax free allowance. I’d like to use a deed of trust so that she can benefit from half the rental income and in doing so save me paying 40% tax on that half! What are the restrictions in terms of using a DOT and paying SDLT?

ive searched the net but get mixed information, hence hoping one of you knowledgeable lot on here will be able to help. I’d like to keep the mortgage in my name too rather than have to remortgage jointly. From what I’ve seen on the net if I kept the mortgage in my name my wife will not need to pay SDLT, but not sure if this is correct.

Our home is also mortgaged jointly, as not sure if this will affect SDLT.

 

thanks in advance for any help

 

dan

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If it were me I'd set up a business to let the property and make your OH a partner or director. You can then balance out the income according to your individual tax positions.

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10 minutes ago, Westward said:

If it were me I'd set up a business to let the property and make your OH a partner or director. You can then balance out the income according to your individual tax positions.

Your mortgage company might not be too impressed if they found out about that, may need to consider asking them or not. 

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10 minutes ago, Westward said:

If it were me I'd set up a business to let the property and make your OH a partner or director. You can then balance out the income according to your individual tax positions.

That would be my initial thoughts as DOT (if it was deemed sufficient to make her joint owner) would also make it a second property for her.

 

Edd

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56 minutes ago, djrwood said:

Looking for some advise before I go to see an accountant. I’ve got a second house which is a mortgaged buy to let. The house and mortgage is solely in my name as I owned it before I met the missus and subsequently got married.

the recent changes in interest which can be offset against the income plus some fortune in work circumstances mean I am now getting battered in tax. My wife only works part time so has a few k spare of her tax free allowance. I’d like to use a deed of trust so that she can benefit from half the rental income and in doing so save me paying 40% tax on that half! What are the restrictions in terms of using a DOT and paying SDLT?

ive searched the net but get mixed information, hence hoping one of you knowledgeable lot on here will be able to help. I’d like to keep the mortgage in my name too rather than have to remortgage jointly. From what I’ve seen on the net if I kept the mortgage in my name my wife will not need to pay SDLT, but not sure if this is correct.

Our home is also mortgaged jointly, as not sure if this will affect SDLT.

 

thanks in advance for any help

 

dan

You need to take proper legal advise not take advice off a forum about shooting pigeons. 

Basically your saying that Mrs doesn’t own any of the property, isn’t on the mortgage, and has nothing to do with the house, but you’d like to put 50% of the income in her name to avoid paying the tax that you owe. 

 

Legitimate options are you can start a LTD company and transfer ownership to the company, but you’d then have to pay company tax, get an accountant and then take dividends and pay the tax on that. For 1 house it’s not worth it. 

Your best option would likely be to consider yourself lucky and pay the tax you owe... 

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Speak to an accountant as there are many changes happening in treatment of income and tax regarding second properties and likely more coming.

 

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39 minutes ago, Stonepark said:

 

Speak to an accountant as there are many changes happening in treatment of income and tax regarding second properties and likely more coming.

 

The problem at the moment is that as a lot of the changes are brand new and never effected people before, some accountants are not up to date and some I have seen are not even aware of the changes. 

 

Would be very certain of getting the right accountant to advise who actually knows what they’re doing. 

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This is where the accountant comes in.

There is some advantage i think on keeping wife at arms length. If at some point you want to sell it as i think it will need to become a principle residence to avoid capital gains claw back. Following a marital separation, its always handy to have a property to drop into. 

Is there also not an option to put it into your pension. You might loose the income but you could claw back some of that tax you have been paying. 

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I had this problem earlier this year and simply transferred half my interest in a BTL to my wife byway of an Assignment of Beneficial interest document. My legal fees were £300 + vat. We now own the property 50/50, no SDLT is payable on transfer between spouses (as long as you don’t make your wife pay for it). The bonus is when we sell it, both of us will be entitled to use our CGT allowance. The annual income tax return  is very simple. For me, it was a no brainier.

HOWEVER, we owned the house outright with no mortgage. Your situation is a bit more complicated. Your lender has a legal interest in your BTL, You can’t just give away half the property without their agreement. However I don’t see why you cannot ask the lender if your wife could be included in the mortgage, but you continue to actually pay the mortgage. Obviously, there will be some arrangement and legal fees, but they shouldn’t be prohibitive.

Other suggestions have been to form a limited company or put it in a pension wrapper. Traditionally, it wasn’t worth forming a limited company if there was only one property. The conditions and overheads are quite onerous (possibly even subject to SDLT) and the costs outweigh the benefits. Now that interest relief is being reduced to zero, the situation might be different. Specific financial advice would be needed.

I have little knowledge of Pension wrappers, however, they will be expensive to set up and if my memory serves me correctly you might also be subject to SDLT. Again, specialist advice is needed.

If your financial affairs are straight forward, I would be surprised if your accountant recommended anything but a simple gift of half the property your wife. Now is the perfect time to get it all sorted ready for the new tax year in April.

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