Most tax efficient way to use Partners Tax Relief

by **boyyo** on Mon Jul 18, 2011 4:23 pm

Hello All,

New to this and looking for some help please.

I have owned an appartment for the past 18 years which is currently rented out, and am also part owner with my partner of our family home.
The appartment is valued at £180K, has £35K endowment mortgage on it which 'matures' in 6 months with the rest (£30K) as Repayment and complete in 6 years.

We are able to buy a second propery to rent out (£165K) with 90% cash.

We are not married, have 2 kids (if that makes any difference!), and have been together for 17 years.
My partner does not work and has not worked for 14 years....although she may disagree.
Is it better for the new appartment to be purchased in her name, reducing / removing Stamp Duty, and using her Tax Relief to offset any profit on the rental?

Would affect any other benefits....ie Family Credits etc..?

Any and all help appreciated.

Thanks

by **Tax Champion** on Mon Jul 18, 2011 4:42 pm

If your partner has no other income, it would make sense tax-wise for the new property to be in her name only while this situation continues, although on a property costing £165K there wiill be stamp duty.
The net rental income after expenses must be declared for Tax Credit purposes.

by **Peter D** on Mon Jul 18, 2011 6:20 pm

Did you live in the property as your PPR. Regards Peter

by **boyyo** on Tue Jul 19, 2011 10:41 am

Hello, and thanks for the responses.

I may not have been very clear, so here is a better explanantion..

Existing family home with a very low mortgage (<£7K) and the potential to borrow @ 1.75% up to £150K on a flexi tracker mortgage.

Existing Appartment owned by me only and lived in by me for the first 4 years which has been rented out for 14 years, all delared and above board on along term lease. In 6 months the only mortgage will be on a repayment basis with 6 years to run. BS is fully aware that it is let out and did'nt ask me to go onto Buy to Let mortgage. This means that I am on a a flexi tracker mortgage which is currently @ 2.25%.

I am capable and qualified (although far removed from my current occupation) to carry out reasonable restorations on buildings and therefore can add value to a property.

We have the opportunity to purchase an appartment and are looking to utilise our existing Credit sources at the attractive rates to purchase it.

Based upon the following assumptions...and I know how good we all are at those!

Interest @ 4% across the TOTAL borrowings. Mortgage would be on a repayment basis so that we end up with something for the kids, and I lost £8K on an Interest only Endowment this year!
Rental income @ 90% of market value to keep occupancy high and cover potential dead spots....even though the current tennant has been there for 9 years with no intention of moving on. I would only do 12 month Lease minimum on the new Appartment and all done directly so no agency fees.

Gross profit would be approx £5400 p/a less 20% maintenance (=£4320), which is good have, and whatever additional value there would be in the house itself. I personally can't believe that it would depreciate over this term...It never has for me so far!!

My question is, would it be better to have my better half buy it and what are the tax implications...or any other considerations I need to take account of!

As always, any information greatfully received,

I