Joint owners & uneven rental income split

[robbo83]

Hi,

My wife and I are currently joint owners of our house with a joint mortgage and we are planning to move to a new house and rent out our current one. I am a higher rate tax payer and my wife is planning to stop working for the next few years as we have a baby on the way therefore we'd like to put all the rental income on her tax return. I understand this can be achieved through a Declaration of Trust to severe the joint tenancy and convert it to a tenants in common agreement and redistribute the beneficial interest to 99%/1% (or 100%/0% if that's possible?).

However, after much googling I am still not clear on the Stamp Duty Land Tax implications. I have read conflicting information on whether we would owe it or not. As we are already joint owners and have a joint mortgage my understanding is that we wouldn't owe any SDLT? Please can you anyone confirm ?

If I am wrong and we would have to pay SDLT I think we would be below the threshold anyway as we have a mortgage of £150k remaining on the property and half that is £75k which is below the £125k SDLT threshold?

One other query on timing if we will have to pay SDLT - we are planning to get a BTL mortgage of £285k on the property when we rent it out, which would mean if we submit the Declaration of Trust when we have the BTL mortgage would we be above the £125k threshold and therefore owe SDLT? Therefore is it best to proceed with the Declaration of Trust now and reallocate the beneficial interest accordingly and then get the BTL mortgage afterwards?

Any help would be greatly appreciated!

Thanks,
Robbo

[jerome.lane]

The SDLT would calculated on the assumption of debt, being 49% of the £150k Mortgage. The threshold is £40k for what is a chargeable transaction so SDLT will be payable on £73,500.

If you remortgage first, the SDLT will be on a higher chargeable consideration although do remember your wife might struggle to get a mortgage in her own name if little other income.

There are potentially ways to achieve what you want without disturbing the equitable interests of you want to give me a call to discuss.

[robbo83]

Hi Jerome,

Thanks for your reply. Doesn't the £40k threshold only apply for a 2nd property? Currently we own 1 property and we are looking to change the beneficial interest on this property.

Thanks

[jerome.lane]

Hi Jerome,

Thanks for your reply. Doesn't the £40k threshold only apply for a 2nd property? Currently we own 1 property and we are looking to change the beneficial interest on this property.

Thanks

Yes - sorry, having a blonde moment. A return is required for a transaction over £40k but SDLT only becomes due if debt gifted between husband and wife exceeds £125k.