BTL in cash in my wifes name

[Eric Mc]

Pit Pony said:

Candellara said:

That doesn't wash with HMRC i'm afraid. As you're married they apply half against each of you tax wise. I was in this situation and 50% is based upon my Wife being a standard rate tax payer any 50% is my liability as a higher rate tax payer.

Set up a Company and run the BTL through that.

That's wrong. Whoever told you that wasn't a qualified accountant.
My wife owns 95% of our buy to lets. We purchased as tenants in common and then later declared the split to the hmrc. Form 17 by the way. She gets 95% of the profit and pays a little tax on it.
We are both jointly liable for 100% of the loan interest, but apportion that 95%/5% as advised by said same accountant.

Your accountant is correct. Some of my clients have gone down that route. However, always be wary of letting tax planning override other "non-tax" issues.

[Countdown]

Soir said:

I was told by my accountant that although BTL house purchase is in joint names, you can put the tenancy agreement in my wife’s name and she will be taxed on the income. Not both of us.

I'm not sure that just putting the TA in the wife's name would be sufficient to satisfy HMRC. At the very least you need to complete the Form 17.

[Eric Mc]

Certain legal hoops have to be gone through before the property can be properly split in this way. Merely allocating rental income in an arbitrary manner between spouses is not going to work.

Once the legal process has gone through, that has further ramifications when the property is eventually disposed of or, if the worst comes to the worst, the couple splits up or divorces.

So, careful consideration is required before going down this path.

[Boz123]

rockin said:

You can't "place it in her name". You'll make her a gift of the purchase price and then she buys the house. No problems whatsoever, the property will be hers, the income will be hers and it will be taxed as hers.

However, it's mind-bogglingly inefficient. BTL is taxed inside out and back to front, has high transaction costs, has tenant risk and is very illiquid. (i.e. sale is "all or nothing".)

Does SWMBO have ISAs? If not, why not?
Does SWMBO have pension? If not, why not?
Does SWMBO have other investments? If not, why not?

The everyman BTL party is well and truly over.

Quite right. Why is BTL so appealing? You pay a huge premium and added complexity vs other investments.

[lordturpin]

Boz123 said:

rockin said:

You can't "place it in her name". You'll make her a gift of the purchase price and then she buys the house. No problems whatsoever, the property will be hers, the income will be hers and it will be taxed as hers.

However, it's mind-bogglingly inefficient. BTL is taxed inside out and back to front, has high transaction costs, has tenant risk and is very illiquid. (i.e. sale is "all or nothing".)

Does SWMBO have ISAs? If not, why not?
Does SWMBO have pension? If not, why not?
Does SWMBO have other investments? If not, why not?

The everyman BTL party is well and truly over.

Quite right. Why is BTL so appealing? You pay a huge premium and added complexity vs other investments.

We have maxed our ISAs/Premium Bonds/My pension. She has no emplyment/pension. I am far from a BTL fanboy - It was more looking for a tax efficient avenue for savings & slight hedge against S&S investments.

[ElectricSoup]

Boz123 said:

rockin said:

You can't "place it in her name". You'll make her a gift of the purchase price and then she buys the house. No problems whatsoever, the property will be hers, the income will be hers and it will be taxed as hers.

However, it's mind-bogglingly inefficient. BTL is taxed inside out and back to front, has high transaction costs, has tenant risk and is very illiquid. (i.e. sale is "all or nothing".)

Does SWMBO have ISAs? If not, why not?
Does SWMBO have pension? If not, why not?
Does SWMBO have other investments? If not, why not?

The everyman BTL party is well and truly over.

Quite right. Why is BTL so appealing? You pay a huge premium and added complexity vs other investments.

What other investments of, say, £100,000 would return, say, £500 a month after costs and taxes (including some allowances for voids in a BTL)? Because that's roughly what you'd get from a BTL bought for cash with no mortgage. Any other investment classes performing that well at the moment? ISAs, S&S etc? Then figure in long term capital gains as well and surely you can start to see the attraction?

[Bumblebee7]

Eric Mc said:

Pit Pony said:

Candellara said:

That doesn't wash with HMRC i'm afraid. As you're married they apply half against each of you tax wise. I was in this situation and 50% is based upon my Wife being a standard rate tax payer any 50% is my liability as a higher rate tax payer.

Set up a Company and run the BTL through that.

That's wrong. Whoever told you that wasn't a qualified accountant.
My wife owns 95% of our buy to lets. We purchased as tenants in common and then later declared the split to the hmrc. Form 17 by the way. She gets 95% of the profit and pays a little tax on it.
We are both jointly liable for 100% of the loan interest, but apportion that 95%/5% as advised by said same accountant.

Your accountant is correct. Some of my clients have gone down that route. However, always be wary of letting tax planning override other "non-tax" issues.

My wife and I have started planning to do the same. I'm just below being a higher rate tax payer but our investments push me into that bracket so we're looking to apportion more of the earnings to my wife who is on a lower salary.

[Eric Mc]

Bumblebee7 said:

Eric Mc said:

Pit Pony said:

Candellara said:

That doesn't wash with HMRC i'm afraid. As you're married they apply half against each of you tax wise. I was in this situation and 50% is based upon my Wife being a standard rate tax payer any 50% is my liability as a higher rate tax payer.

Set up a Company and run the BTL through that.

That's wrong. Whoever told you that wasn't a qualified accountant.
My wife owns 95% of our buy to lets. We purchased as tenants in common and then later declared the split to the hmrc. Form 17 by the way. She gets 95% of the profit and pays a little tax on it.
We are both jointly liable for 100% of the loan interest, but apportion that 95%/5% as advised by said same accountant.

Your accountant is correct. Some of my clients have gone down that route. However, always be wary of letting tax planning override other "non-tax" issues.

My wife and I have started planning to do the same. I'm just below being a higher rate tax payer but our investments push me into that bracket so we're looking to apportion more of the earnings to my wife who is on a lower salary.

But make sure you go about this taking into account FULL knowledge and understanding of the legal requirements you must fulfill plus the knowledge that you could be jeopardising long term issues for short term tax gains.

Get proper legal and accounting advice.

[Boz123]

ElectricSoup said:

What other investments of, say, £100,000 would return, say, £500 a month after costs and taxes (including some allowances for voids in a BTL)? Because that's roughly what you'd get from a BTL bought for cash with no mortgage. Any other investment classes performing that well at the moment? ISAs, S&S etc? Then figure in long term capital gains as well and surely you can start to see the attraction?

Plus all the hassle of administration? Plus the extra SDLT on the way in and extra CGT on the way out? When the FTSE all-share yields 4.5%? S&P 500 return over past 5 years of +75% vs UK House prices +13%?

HMOs in Liverpool yielding over 10% vs niche investment funds? Pros and cons for both...

I know horses for courses and apples to oranges, but if you're looking to diversify s&s already then surely assume you've got a v long position in residential property in the house you already live in?

[ElectricSoup]

Boz123 said:

ElectricSoup said:

What other investments of, say, £100,000 would return, say, £500 a month after costs and taxes (including some allowances for voids in a BTL)? Because that's roughly what you'd get from a BTL bought for cash with no mortgage. Any other investment classes performing that well at the moment? ISAs, S&S etc? Then figure in long term capital gains as well and surely you can start to see the attraction?

Plus all the hassle of administration? Plus the extra SDLT on the way in and extra CGT on the way out? When the FTSE all-share yields 4.5%? S&P 500 return over past 5 years of +75% vs UK House prices +13%?

HMOs in Liverpool yielding over 10% vs niche investment funds? Pros and cons for both...

I know horses for courses and apples to oranges, but if you're looking to diversify s&s already then surely assume you've got a v long position in residential property in the house you already live in?

Thanks for the answer. I know zero about stocks and shares and other such investments, in fact I'm a bit scared of the subject. But I think I understand property. I had no idea that there were financial investments yielding 4.5% at the moment. I'm trying to formulate a plan for retirement at the moment which will involve, hopefully, about £1m to invest in things to provide passive income. Diversity is going to be something to consider, so a mix of some properties and financial investments will be needed. I have lots of homework to do.

[Mr Pointy]

ElectricSoup said:

Thanks for the answer. I know zero about stocks and shares and other such investments, in fact I'm a bit scared of the subject. But I think I understand property. I had no idea that there were financial investments yielding 4.5% at the moment. I'm trying to formulate a plan for retirement at the moment which will involve, hopefully, about £1m to invest in things to provide passive income. Diversity is going to be something to consider, so a mix of some properties and financial investments will be needed. I have lots of homework to do.

Fundsmith is currently running at +18.25% annualised return:
https://www.fundsmith.co.uk/fund-factsheet

Have a look at the IM sticky at the top of the Finance forum. Nik &/or JulianPH will be happy to talk through your options, for free & with no obligation (there can't be as they aren't allowed to sell you anything).

[ElectricSoup]

Yes well that's the thing with financial products isn't it. Maybe it's returning 18% now, maybe -4% next year. Who knows. In retirement I'm looking for as near guaranteed, regular income as possible, from the majority of my capital. It's the time of life when stability of return is more important than taking risk chasing elusive higher returns.

[leef44]

ElectricSoup said:

Thanks for the answer. I know zero about stocks and shares and other such investments, in fact I'm a bit scared of the subject. But I think I understand property. I had no idea that there were financial investments yielding 4.5% at the moment. I'm trying to formulate a plan for retirement at the moment which will involve, hopefully, about £1m to invest in things to provide passive income. Diversity is going to be something to consider, so a mix of some properties and financial investments will be needed. I have lots of homework to do.

Start with the book "How to own the world" by Andrew Craig. It's a straight forward easy to read book for non finance minded people.

Then make a free no obligation appointment to have a chat with Nik and Intelligent Money (see in the Finance thread).

You are right, diversity is the key.

[anonymous-user]

leef44 said:

You are right, diversity is the key.

You like potayto, I like potarto
You like tomayto, I like tomarto
Potayto, potarto, tomayto, tomarto!
Let's call the whole thing off!

Although the concept of "diversity" as investment strategy is at least an interesting one!

[Mr Pointy]

ElectricSoup said:

Yes well that's the thing with financial products isn't it. Maybe it's returning 18% now, maybe -4% next year. Who knows. In retirement I'm looking for as near guaranteed, regular income as possible, from the majority of my capital. It's the time of life when stability of return is more important than taking risk chasing elusive higher returns.

That's the annualised (sort of average) return every year since 2015, not just the peak performance. However, you are correct in saying that later in life it would be wise to not have all of your eggs in that basket, but you might put a few of them in there. Speak to Nik & he will discuss options for how to allocate your funds to provide security of income whilst taking account of tax issues such as IHT. You are probably going to be retired for a long time so you need your money to be working a bit just to keep up with charges & inflation.

[Eric Mc]

rockin said:

You like potayto, I like potarto
You like tomayto, I like tomarto
Potayto, potarto, tomayto, tomarto!
Let's call the whole thing off!

Although the concept of "diversity" as investment strategy is at least an interesting one!

What the hell is a "tomarto"?

[Groat]

Eric Mc said:

What the hell is a "tomarto"?

It's a villagio twixt oporto and potarto
where once I spied an audi quattro

[anonymous-user]

Eric Mc said:

What the hell is a "tomarto"?

Google tries its best to assist, albeit not quite on target,
"A relatively concise collection of songs, Tormato found Yes largely avoiding the extended instrumental workouts that filled out best-selling records like Tales from Topographic Oceans in favour of shorter songs such as Onward and the minor hit single Don't Kill the Whale. Unfortunately, those abbreviated running times may have had more to do with a general lack of focus than anything else."

[Pit Pony]

ElectricSoup said:

What other investments of, say, £100,000 would return, say, £500 a month after costs and taxes (including some allowances for voids in a BTL)? Because that's roughly what you'd get from a BTL bought for cash with no mortgage. Any other investment classes performing that well at the moment? ISAs, S&S etc? Then figure in long term capital gains as well and surely you can start to see the attraction?

My calculations over 5 years.
Invest £42k, to buy a £135k house. enjoy a profit of £6k a year = £30k before tax. House increases value by £20k .
Because we don't need the £6k at the moment, use £5k to reduce the size of the loan.
There are risks. There are taxes when and if we come to sell.
The value could drop. But in 12 years, there might be no loan and £700 per month plus inflation.

[anonymous-user]

Did that 5 years ago, literally cash from a US$ account in Singapore, only issue was proving the source of the money under the money laundering rules, nothing insurmountable.
Solicitor wax concerned about it being a gift, if transfer was from an account in my sole name, but the sing account was joint so again not a problem.