Buying a second property

[Soniks]

Hi
I currently own my own home with my sole name on the title deeds and mortgage.  I'm looking to purchase a new property and convert my existing property into a BLT investment whilst at the same time releasing equity to help purchase the new place. 

My wife is currently not earning and I would like to make use of the income from the property against her tax allowance.  I understand it is possible to setup a declaration of trust allowing her to retain the main beneficial interest in the property ie rental goes to her from a tax perspective.  My questions

- Does my wife have to be on the title deeds for this arrangement and would this need to be a tenants in common arrangement?  If so are there any stamp duty implications (there is approx 60k left on the mortgage) but will be looking to release a lot more as part of the remortgage
- Does the mortgage need to be in joint names or can it solely be in my name.
- Do I have to let the mortgage company know of the declaration of trust or is this something that does not concern them as they will still have first claim to the property in the case of a repossession.
- I'm assuming the declaration of trust is required after the purchase and remortage is complete?
- Is it better to have my wife's name on the existing property from an inheritance tax/CGT perspective?

Many thanks

[maths]

Does my wife have to be on the title deeds for this arrangement and would this need to be a tenants in common arrangement? If so are there any stamp duty implications (there is approx 60k left on the mortgage) but will be looking to release a lot more as part of the remortgage

No need to go on title deeds. No SDLT charge if she assumes no responsibility for the mortgage.

Does the mortgage need to be in joint names or can it solely be in my name.

Can remain in your name.

- Do I have to let the mortgage company know of the declaration of trust or is this something that does not concern them as they will still have first claim to the property in the case of a repossession.

Various views on this. As there charge remains unchanged and if wife doesn't go on legal titile there is no need to notify.

- I'm assuming the declaration of trust is required after the purchase and remortage is complete?

Probably preferable.

- Is it better to have my wife's name on the existing property from an inheritance tax/CGT perspective?

Legal title irrelevant for IHT and CGT. Beneficial ownership is the key and under a declaration of trust wife acquires such.

Where wife not on mortgage/legal title any interest payable on mortgage will not be a deductible expense in computing rental profit.

[Soniks]

Thanks for your response Maths.

It seems to me the best course of action would be to put my wife on the title deed and mortgage as a tenants in common arrangement with a majority split in favour of my wife. That way it should be possible to claim the mortgage relief until it is phased out completely. With respect to SDLT in this situation am i right to think there is nothing to pay given the outstanding consideration being 61k? I would do the transfer of equity before remortgaging.

Would you agree this is the best course of action to be as tax efficient under the current regs?

Regards

[maths]

Adding wife to mortgage requires that she be added to the legal title and the mortgagee's agreement.

A declaration of trust could at the same time be executed under which an appropriate beneficial interest split be agreed (eg 60/40 etc).

She would then in principle be exposed to SDLT but no actual SDLT charge arises (as below £125k).

As no other properties are owned at date of acquisition by wife of an interest then the 3% SDLT charge does not apply.