Hi there, sorry I know this is similar (but not the same) as other questions in the most recent pages of the board, so thanks for your patience in dealing with the all-too-familiar sounding question!
- My wife and I own one BTL property (Tenants in Common) with a mortgage, circa 235k. I owned it as residential for 3y but we then took out a joint remortgage on it 2y ago (Tenants in Common, unequal split).
- We are looking at remortgaging it later this year, as the discount rate is coming to an end.
- With the introduction of Section 24, we are also looking to minimise tax on rental profits.
- Currently the Declaration of Trust doesn't specifically mention RENTAL income in terms of how it is apportioned (only the SALE is discussed).
- As we are married, HMRC currently assume 50/50 split in terms of taxation on rental profits. The Declaration was done correctly through a solicitor but we never submitted a Form 17 at the time (roughly 2 years ago) as we didn't know anything about it and 50/50 split seemed fine as we were both lower rate tax payers.
- I'd like to make the Beneficial Interest such that she is entitled to 99% of the rental income and 1% for me (or whatever the max permissable split is). This is because I am now a higher rate taxpayer and she is looking after our child full time and therefore (once maternity pay ends) will have no income at all. Seems like a waste of her personal allowance.
So:
1. My solicitor has said that when remortgaging this time (which will be with a different lender) it will be necessary to submit new entries to the Land Registry and a new / amended Declaration of Trust can be done at the same time, to change the Beneficial Interest. Is this correct?
2. I understand a Form 17 has to be submitted within 60 days of the Declaration of Trust being signed but since we never submitted a Form 17 when we bought the property 2y ago and signed the original Declaration of Trust, will this new Form 17 be accepted (I think this all hinges on the nuances of the answer to question 1 above - basically is it critical as to whether the Declaration of Trust with the NEW 99/1% Beneficial Interest is a NEW Declaration or is an AMENDED Declaration treated as new by virtue of having to be signed again by both parties, with a new date?)
3. Is there likely to be a SDLT or CGT bill triggered by doing this? (happy to provide any relevant numbers, if required)
4. If there is a tax bill triggered, are any reliefs likely to be available? (We lived in this property for 3 years before renting it out and moving to a new home, 2 years ago)
5. Assuming we get through all those hurdles, I understand from reading various other posts that an undesirable tax bill may be triggered if we ever sell this property - is it just a case of proper planning and varying the Beneficial Interests via another Declaration of Trust before selling?
I've tried to provide as much information as possible but please ask if I've omitted or been vague on something that is critical.
Thanks for any help in advance!
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