Buying Second Home - Transferring Ownership to Partner?

Hello

I am considering buying a flat for rental purposes. I am unmarried and currently live with my partner - we have a joint ownership on the house and mortgage.

I am considering transferring ownership of the house to her name and buying the flat in my name - to avoid tax etc. The flip-side of transferring the house to my name and her buying the flat is also a consideration.Trust etc. is not an issue and I would like to concentrate on the practical aspects of the transaction.

Can anyone advise how easy this is to do and what is required? Is this the best way to minimise tax implications when it comes to selling in the future etc.?

Many thanks in advance.

Col.

Reply to
ericofold
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In what way do you think it will help avoid tax?

I can't see anyway that it will help with this. BICBW

It will be completely ineffective. The rental flat will be liable to tax purely because it is rented out even if it is your only house. The CGT PPR excemption rules require that you actually live in the house for the excemption to apply

HTH

tim

Reply to
tim (back at home)

It would be difficult to say that the flat you are considering buying is your principal private residence if you are renting it out to someone else, so you may find that you still have to pay CGT when you sell it.

Reply to
Jonathan Bryce

In message , snipped-for-privacy@hotmail.co.uk writes

?? I dont follow this, how are you planning to achieve this tax saving?

Splitting ownership isnt necessarily going to save tax, and it could cost you more. It is the use of the property which counts, no who owns it.

If you own it and let it out, then the rent is going to be taxable on you solely. If both of you sell it then you each have allowances and thresholds for each tax band, etc., and these will be doubled if the property is owned jointly. In addition, if in your own name then when you sell it, as it is can not be your principal residence because you are letting it out, any profit you make will benefit form only one Capital Gains Tax allowance, whereas this would be doubled if you owned it jointly. You couldnt do the 'transfer to spouse the second before selling it' trick because your arent married.

Suggest you both live in it for a few weeks though, so that it will have been your residence ta least for some of the time, this will reduce CGT later.

If owned solely and one of you dies then ownership will pass according to your wills, but if they were both owned jointly then they would vest in the survivor irrespective of any will, and no other parties could make a claim. This could also be helpful in later life if one needed to buy long term care.

Reply to
john boyle

"I am considering buying a flat for rental purposes. I am unmarried and

currently live with my partner - we have a joint ownership on the house

and mortgage. I am considering transferring ownership of the house to her name and buying the flat in my name - to avoid tax etc."

Take care about inheritance tax. If you are unmarried at the time you make a gift then the gift will be included in your estate for inheritance tax if you die within 7 years of making it (even if you marry later).

Robert

Reply to
Robert

Hello again.

Thank you all for your kind comments and advice - it has certainly provided food for thought.

My idea of tax saving via transfer of property to my partner originated from the advice of a colleague of mine:

He had owned his own flat for some time and moved in to his partner's house, while still retaining the flat. He "simply" put an ad in the local paper advertising it for rent and had no problem letting it out on 6 month agreements. He did this for about 3 years and then sold the property at quite a nice price. According to him, there were no tax nightmares as, for all intents and purposes, and given the information you have all kindly supplied, this was still viewed as his own place of residence.

I realise there are must be some mortgage, insurance, and not to mention legal implications here. Can anyone comment?

Is there another way that I could use my current "living arrangement" in a similar manner to my beneift i.e. given that I am considering investing in another property, still own my own with my partner (who has a different name)?

Again, many thanks.

Col.

Reply to
ericofold

His situation was completely different to the one you're contemplating.

He already owned the rental flat and lived in it before renting it out. This means that the last three years of ownership of it qualify to be treated as "residence" and so all the capital gain is exempt (and any part that isn't (e.g. if the "about 3 years" turn out to be more than 3) would qualify for Letting Relief instead). His situation is unaffected by "in whose name" the house he is living in with his partner is.

You, on the other hand, are thinking of buying a rental flat which neither you nor your partner have lived in, and so it will not be qualifying for any such reliefs.

Mortgage implications: The lender must consent to renting. Not a problem if you get a specific "buy to let" loan. It will generally have a slightly higher interest rate than a normal domestic mortgage. Interest on the loan used to buy the property counts as an expense of the rental business and you only pay income tax on the rental *profit*.

Insurance implications: The insurer must consent to renting. You may need to get insurance through a letting agency, as insurers who specialise in let properties tend not to deal direct. Premiums are of course an allowable expense.

Legal: Plenty. You need an annual gas safety check (unless there is no mains gas in the property). You need an HMO licence if letting to more than two unrelated people. You need (if in Scotland) to register both yourself and the property with the Council to comply with the ASB Act. You ought to get properly-worder SAT paperwork drawn up.

It is irrelevant what your partner's name is.

Consider acquiring the rental property together. That way income tax on the rent will be split (and may put off the moment at which one or both of you cross the higher rate tax threshold), and so will CGT on disposal (and so you will have two annual exempt amounts deducted from the taxable gain).

Reply to
Ronald Raygun

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