[planemad]

Hi all

Currently 38, mortgage paid off fully about 1 year ago.

We live in a large 5 bed house with 2 children under 10.

Wife is a zero tax payer as does not work, I’m a 40% tax payer.

We are looking into purchasing now our future home for when the children leave and we retire (I plan about retiring when 58). With this future home would like to secure now and rent it out for a number of years Totally in my wife’s name so she receives the rental income.

When the children have flown the nest we would sell the 5 bedroom house and move into our Retirement home.

I understand my wife would declare the income on the rent for the next 20 years and pay tax on any income above her personal allowance.

Where I’m unsure is will there be any other tax implication further down the line when we do downsize?

Thanks in advance

[Scoobyd]

Don't forget to factor in the second home stamp duty payable on the purchase of this future retirement home. That's a real stinger. Might even be worth waiting a budget or two to see if it changes especially in light of the potential economic issues ahead.

[davyk31]

And make sure you never get divorced as it is hers and all hers. Remember you also may not be able to control whether there is a divorce or not if she gets tempted elsewhere.

[RickLS7]

Sounds sensible to me. If the rental income is over the personal limit, your wife will have to pay tax at 20% as normal above the threshold. As you're moving into the house eventually, then you wont have to capital gains.

I rent a house out and have to pay tax on the income at 40%. The mortgage is paid off so it's still worthwhile. One day though I will have to pay capital gains when it sells but probably not for another 20 years yet.

[isleaiw1]

Originally Posted by planemad

Hi all

Currently 38, mortgage paid off fully about 1 year ago.

We live in a large 5 bed house with 2 children under 10.

Wife is a zero tax payer as does not work, I’m a 40% tax payer.

We are looking into purchasing now our future home for when the children leave and we retire (I plan about retiring when 58). With this future home would like to secure now and rent it out for a number of years Totally in my wife’s name so she receives the rental income.

When the children have flown the nest we would sell the 5 bedroom house and move into our Retirement home.

I understand my wife would declare the income on the rent for the next 20 years and pay tax on any income above her personal allowance.

Where I’m unsure is will there be any other tax implication further down the line when we do downsize?

Thanks in advance

Capital gains tax. The period it’s not principle private residence means it’s is liable for CGT, so when you sell you will have to pay tax on the profit for period it was rented out. So if you move in at 58 and sell at 78, half the gain broadly will be taxable (a bit of relief that influences that but not much...)

And yes, second home stamp duty is a killer. And you will need to make sure any mortgage to buy is in your wife’s name, and if she isn’t earning that might be more challenging... so you might need to remortgage current home to raise cash to buy outright...

[planemad]

Originally Posted by Scoobyd

Don't forget to factor in the second home stamp duty payable on the purchase of this future retirement home. That's a real stinger. Might even be worth waiting a budget or two to see if it changes especially in light of the potential economic issues ahead.

Exactly our feelings, we are gonna sit by and watch the market.
I must say mind you I expect the market to remain buoyant.

[planemad]

Originally Posted by davyk31

And make sure you never get divorced as it is hers and all hers. Remember you also may not be able to control whether there is a divorce or not if she gets tempted elsewhere.

For sure, good advice. Whilst I also consider this. I chose not to let the possibility rule my decisions or stop me from trundling onwards.
I prefer to box clever and have my own significant contingency plan and firepower.

[planemad]

Originally Posted by isleaiw1

Capital gains tax. The period it’s not principle private residence means it’s is liable for CGT, so when you sell you will have to pay tax on the profit for period it was rented out. So if you move in at 58 and sell at 78, half the gain broadly will be taxable (a bit of relief that influences that but not much...)

And yes, second home stamp duty is a killer. And you will need to make sure any mortgage to buy is in your wife’s name, and if she isn’t earning that might be more challenging... so you might need to remortgage current home to raise cash to buy outright...

This is my worry on the capital gains tax. Luckily we won’t be needing a mortgage and I believe there are ways of jointly owning but my wife able to tale the full rental income.

[davyk31]

Tell us more about the joint ownership but
your wife accounting for the full income. Sounds interesting.

[isleaiw1]

Originally Posted by davyk31

Tell us more about the joint ownership but
your wife accounting for the full income. Sounds interesting.

And to me as an accountant - a shared asset that only generates income for one half didn’t feature in my teaching!

[Armaan]

Originally Posted by isleaiw1

And to me as an accountant - a shared asset that only generates income for one half didn’t feature in my teaching!

That was missing from my textbooks too! If it's registered as a joint asset you have to split the income too.

[davyk31]

I think we would all be doing it if possible so looking forward to some insight.

[AlwynMike]

Originally Posted by davyk31

And make sure you never get divorced as it is hers and all hers. Remember you also may not be able to control whether there is a divorce or not if she gets tempted elsewhere.

That's a stinger.
She gets to keep what's hers, but you don't get to keep what's yours!!

[Sasquartch]

Generally it's always cheaper to borrow money against your principal home rather than a buy to let mortgage especially if the amount borrowed is a low proportion of your home's value

[Goneinsixtyseconds]

Originally Posted by Sasquartch

Generally it's always cheaper to borrow money against your principal home rather than a buy to let mortgage especially if the amount borrowed is a low proportion of your home's value

Given me food for thought now, a great house near us for sale as a doer upper and rental, only wants cash buyers. Could increase current mortgage and become a cash buyer I guess.

[planemad]

Originally Posted by isleaiw1

And to me as an accountant - a shared asset that only generates income for one half didn’t feature in my teaching!

https://www.taxinsider.co.uk/joint-p...actical-points

It seems that I can do 99% to her and 1% to me using form 17.

I'm going to explore how the property is protected for example if she passes away before me.

I understand that then she owns most of the property, but as long as upon death it passes to me or the children I have no issue.

[ZedsRedBaby]

Originally Posted by isleaiw1

And to me as an accountant - a shared asset that only generates income for one half didn’t feature in my teaching!

But could he use the spousal exemption to the settlements legislation to be a co-owner and waive his share of the income? Similar to what company directors do when splitting dividend income with spouses?

[isleaiw1]

Originally Posted by planemad

https://www.taxinsider.co.uk/joint-p...actical-points

It seems that I can do 99% to her and 1% to me using form 17.

I'm going to explore how the property is protected for example if she passes away before me.

I understand that then she owns most of the property, but as long as upon death it passes to me or the children I have no issue.

So you don’t own it jointly, you own it in unequal shares...

[isleaiw1]

Originally Posted by ZedsRedBaby

But could he use the spousal exemption to the settlements legislation to be a co-owner and waive his share of the income? Similar to what company directors do when splitting dividend income with spouses?

You can always wave your share of dividend income but I don’t think you can wave your right to income and give it to your partner to avoid, or should that be evade, tax. Otherwise, can I not ask my employer to pay some of my salary to my wife? Wellclearly not me as I don’t. Have one but speaking figuratively...

[ZedsRedBaby]

Originally Posted by isleaiw1

You can always wave your share of dividend income but I don’t think you can wave your right to income and give it to your partner to avoid, or should that be evade, tax. Otherwise, can I not ask my employer to pay some of my salary to my wife? Wellclearly not me as I don’t. Have one but speaking figuratively...

Mmm, see what you mean. I looked at the link the OP posted and it seemed contradictory to me (not that I gave it too much scrutiny). Time to consult a proper tax adviser I think.

[Craig-SM]

Ignore

[tomr1985]

If you don't need all the rental income immediately, own it 50:50. Wife takes 50% of income after expenses and you take 50% and stick yours into a private pension - no 40% tax.