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Where Taxpayers and Advisers Meet

purchase in wife's name, income in mine

youngplug
Posts: 11
Joined: Mon Dec 02, 2013 10:57 am

purchase in wife's name, income in mine

Postby youngplug » Mon May 11, 2015 10:53 am

We currently hold a number of properties but I am now struggling to raise finance as my income in minimal and a lot of lenders require at least £20k income before they will lend even for buy to let purchases. We are therefore trying to establish if we can buy our next property in my wife's name (who is a higher rate tax payer) and mortgage in her name but I receive all of the property income (and pay tax on at basic rate). Can anyone help please?

pawncob
Posts: 4557
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: purchase in wife's name, income in mine

Postby pawncob » Mon May 11, 2015 11:20 am

Are the other properties in joint ownership?

Us the "search" facility and look at "joint rental income" or similar.
With a pinch of salt take what I say, but don't exceed your RDA

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: purchase in wife's name, income in mine

Postby section 44 » Mon May 11, 2015 11:59 am

generally, if your wife owns the properties then the rental income belongs to her and should be taxed on her

Would like the capital also belong to you or merely the rental income? If the former then it sounds like you would your wife to merely act as a nominee and any tax should fall on you, however:
1. the lender might not allow your wife to act as a nominee; and
2. you might not be entitled to any tax deduction for interest incurred by your wife.

youngplug
Posts: 11
Joined: Mon Dec 02, 2013 10:57 am

Re: purchase in wife's name, income in mine

Postby youngplug » Mon May 11, 2015 2:00 pm

thanks for the responses. To hopefully clarify a little, we are only looking to do this from an income perspective, not capital. If / when we do eventually sell then we will sort out the tax implications at that point in time. So we are looking to just take out the mortgage in my wife's name and I receive all of the income which will be added to my exisiting rental property income. To some extent this is to save my wife from having the extra work of doing a self assessment as she is PAYE but also it is definitely better from a tax perspective if I receive the income as I am a basic rate tax payer and she is higher rate.
From the mortgage company's perspective I'm not sure how they would determine (or be interested in) who is declaring the income?
From our internal perspective we would be using joint funds to pay the deposit on the mortgage or if it helped in some way I could pay the deposit from my bank account to maybe show that I have an interest?

youngplug
Posts: 11
Joined: Mon Dec 02, 2013 10:57 am

Re: purchase in wife's name, income in mine

Postby youngplug » Mon May 11, 2015 2:09 pm

sorry forgot to add, no the other properties are all in my name, my wife owns only our PPR in her name

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: purchase in wife's name, income in mine

Postby section 44 » Mon May 11, 2015 2:11 pm

If your wife would retain the capital in the property then I would be surprised if HMRC would accept that you could effect a transfer of the right to the income to you as you propose (if necessary, HMRC might be able to rely on the settlements legislation).
From the mortgage company's perspective I'm not sure how they would determine (or be interested in) who is declaring the income?
I'm speculating but I suppose examples might be:

Being interested whether another person has any beneficial interest in the property that could affect their security (overreaching).

Being interested in whether there is any tax evasion given that they might be in receipt of any dirty money being used to repay the loan.

General breach of lending terms and conditions (particularly if deliberate).

Ian McTernan CTA
Posts: 1232
Joined: Wed Aug 06, 2008 3:02 pm
Location: Bedford
Contact:

Re: purchase in wife's name, income in mine

Postby Ian McTernan CTA » Tue May 19, 2015 11:41 am

Your first post was a bit misleading, as you said 'we own a number of properties' when later you clarify and say they are all in your name...

The £20k income thing is a recent invention by the mortgage companies when you tend towards 10 or more properties- how many do you now own?

There is a quite easy solution to this- set up a property management company and in addition to managing your own properties, manage at least one other so that you can say that you are managing other properties as well as your own. Then charge enough to arrive at a net income of £20,000 (or just pay yourself a salary of £20,000 from the company), problem solved. You never know, you might actually enjoy it so much you take on more clients managing their properties too:-)

As for trying to half your cake and eat it, forget it. It's not worth the hassle of trying to artificially move rental income away from the higher earner. The easy solution here is to ensure the property is in her name, all the income is in her name and after all expenses are claimed, it does not make a profit- mainly by mortgaging it as high as possible together with charging a management fee at a commercial rate for managing the property.
McTernan Associates Ltd
Chartered Tax Advisers
Bedford
Email through link on website:
http://www.imcternan.com

King_Maker
Posts: 6538
Joined: Wed Aug 06, 2008 3:22 pm

Re: purchase in wife's name, income in mine

Postby King_Maker » Wed May 20, 2015 7:43 am

Yes, it can be done - although the costs might be prohibitive.

Then there is the possible mortgage fraud aspect to consider?

maths
Posts: 8033
Joined: Wed Aug 06, 2008 3:25 pm

Re: purchase in wife's name, income in mine

Postby maths » Wed May 20, 2015 11:51 am

Is it not possible for you and wife to apply for a joint mortgage even though she is the one in whom the mortgagee will be primarily interested?

You are then both legal owners.

You are both then able to execute a declaration of trust under which, say, you own 99% and she 1%.

You then get 99% of the rents; she gets 1%.


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