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View Full Version : Rented your house out? Gulp.


blue up
14th Aug 2011, 16:18
What with base moves on the horizon, I've been looking into the possibility of buying a second house (UK) and renting out our old one. Has anyone any good tips for utilising any tax loopholes etc?
I did wonder if I could put the old house (fully paid for) in the name of my wife and then letting her rent it out and not have to pay income or capital gains tax. Anyone know if this works?

Bleedin' minefield, isn't it!

Possibly the most stressful time since that first sim ride. :\

Flap 5
14th Aug 2011, 16:42
Better hope you remain on good terms with the wife ....

cavortingcheetah
14th Aug 2011, 17:02
It's not really a minefield but my advice is that what you need is proper legal advice based on your and your wife's circumstances.
You talk about putting your present house in your wife's name. This presumes it is in yours and not in joint names. If it's below the stamp duty cut off value then you could probably transfer your interest to her and only pay the legal fees.
Certainly if the house were in her name and rented then she would be able to offset her tax free allowance against any rental income. But would you be advised to get a mortgage or remortgage your existing house if it is going to become a bought to let property. Perhaps it would be better to mortgage that to the hilt and pay cash for your second home which would then become your primary residence?
Capital gains tax? Well, if she leaves the house to you there isn't any but if she doesn't then her estate allowance of ? 325K comes into play so then you'd lose your joint allowance for IHT purposes.

It is a trifle complicated and worth paying for a professional opinion as to the best way to go about achieving success from what might be a major financial undertaking.
You might also want to consider using a lawyer to draw up the proper paperwork to protect you or your wife in the position of land lord.

racedo
14th Aug 2011, 17:02
Borrow much as you can against existing one and use it to fund new one.

Allowed set off BTL mortgage interest from when 1st let out propertyt but do take proper advice before doing so.

Oh and you can sell any time up to 3 years after it was your PPR and you will not pay Capital gains tax...............this is at present so could change.

ZH875
14th Aug 2011, 17:13
Contact your local MP for advice, I am sure they will know every loophole going.

OFSO
14th Aug 2011, 18:52
Blue up, one thinks perhaps of a small limited company operating at a loss placed in an offshore trust located on the Isle of Malta.......but indeed, professional advice needed.

blue up
14th Aug 2011, 19:01
Flap 5. Fortunately I married "family money"

Anyways, chaps, I'm off to see an IFA tomorrow but thought it worth seeking the sage advice of the fringes of society residing here on Pprune. If there is a slightly nerfarious tax dodge then I'm sure that a pilot has used it.:E

Cheers


PS Room for a helipad in the new res.:ok:

Flap 5
14th Aug 2011, 22:54
Flap 5. Fortunately I married "family money"



Looks like you've already achieved your aim.

Vitesse
15th Aug 2011, 08:43
If you think the idea of renting your house out is scary, just wait until you find out how tenants can behave / think / live!

Exascot
15th Aug 2011, 09:24
just wait until you find out how tenants can behave / think / live!

The whole experience was a nightmare - I don't want to think about it. However most problems arose because we were living abroad and the agents were useless.

Re Tax; our house was in joint names but all the rent income went to my wife. I can't remember if it was my lawyer or accountant who said that this was OK. I don't know if it was correct or not but worth asking about.

ShyTorque
15th Aug 2011, 09:37
My own advice: Never rent out any house you might have to live in yourself at some later date.

Some tenants are great. Others are at the opposite end of the scale. Last time we suffered the latter type during the latter part of an overseas contract and ended up having to build a new kitchen and a new bathroom when we returned to find the place trashed by peasants. The agent did nothing except take a big percentage of the rent from us. Total wasters.

cleo
15th Aug 2011, 10:04
Hmm - some interesting points here. I'm seriously considering 'investing' in a second property near my home.
There is no intent to rent (at the moment) as income is not the priority but more space for family and friends who come to visit and the added storage space and parking would be a welcome benefit.

Any comments or experience welcome:ok:

M.Mouse
15th Aug 2011, 12:23
I owned four properties for some years. Equal numbers of good/bad tenants. Good are a dream the bad are a total nightmare.

My best property was one I had bought, renovated and lived in myself with the intention of staying for some years. I had spent a lot of money on furnishings and fittings. The house was wrecked. Cigarette burns on furniture and carpets, rotting rubbish in bags in the kitchen and so on.

Agents are generally a waste of space. They find tenants and take up references but a tenant can fake those. The agents take a large slice but when there is a problem ring you and ask what you want to do. If you are abroad a necessary evil but if not then I would now handle all myself. The legal documentation certainly used to be straightforward.

We do of course have the other issue of is it a good investment. Having borrowed on each property to fund the next the market then crashed. Rents did not cover the committments and I spent several years spending most of my salary subsidising the houses. The values plummetted. Eventually I cut my losses and sold the lot. I lost (early mineties) around 40,000 overall.

Buy to let? Marvellous idea especially in these times of financial stability.

racedo
15th Aug 2011, 20:13
Have quite a few BTLs and pretty much know that over the course of a year I am subsidising ;) but I am ok with that as investing long term for a pension and some :mad: fund manager is not taking his 4% in fees and Govt can't steal.

Some good tenants who never hear from, one my post still goes to and I collect weekly and she has place immaculate, pays less rent than market but her mum lives next door to it and she will never be a problem.

Lots of chavvy ones with agents not that good but cheaper than me managing.

In 20 years time when hopefully property has recovered will need to come up with a strategy to release equity in it but property should have gone way past inflation by then

Mac the Knife
15th Aug 2011, 20:58
Rent to a large stable reputable Company (IBM, Caterpillar Tractor, Sony etc.) rather than an individual.

:ok:

mixture
15th Aug 2011, 22:56
Has anyone any good tips for utilising any tax loopholes etc?

It always amazes me when people come to Jet Blast on PPRuNe expecting to get serious advice on complex matters from a bunch of John Doe's on the Internet who have not been told half the story of the questioners full personal circumstances.

Sometimes it is worthwhile investing in the expertise of a good lawyer and/or tax advisor with a proven track record. Not only will they be fully up-to-date on the latest guidelines, rules, laws, case law etc., but they will have extensive experience from working with other clients ..... AND, perhaps most importantly :cool: ....they will have Professional Indemnity insurance in place to cover your costs if they give you a bunch of duff advice that ends up costing you money !

Trouble is, you won't get any of that on PPRuNe. You don't know if people are reciting heresy they heard down the pub, regurgitating some old stuff they read up on a few years ago that's now obsolete etc. The real guys (and no, I'm not a lawyer or an accountant !) .... won't say much, because the best advice doesn't come free of charge, and as I said before, they'll know how important it is to be fully briefed on your exact personal circumstances, and somehow, I don't think you'll be wanting to air your personal affairs in a public forum !

Vitesse
16th Aug 2011, 07:44
On the other hand, most reasonably intelligent people are able to pick out the good stuff from the humour.

Rather than just spending money up front it's never a bad idea to arm yourself with a bit of background.

Personally I've managed to deal with a speeding ticket just by reading a forum. I know I should have done the same with a motor insurance claim...

Regarding house letting, there's a lot on various forums and the original question was, I think, worth the ask. Any JB regular knows the quality and variety of replies he/she will receive here!

Llademos
16th Aug 2011, 08:22
I had an hour with an accountant who was a property rental expert. Saved me a couple of thousand - at least - in ensuring I claimed all I was legally able to against the rental income.

You can even offset the cost of the accountant against tax ...

Ll

mixture
16th Aug 2011, 09:06
Vitesse,

it's never a bad idea to arm yourself with a bit of background.

All very well, but how do you know that "background" is correct and not just heresy ? Or how do you know that "background" has not recently become obsolete due to new legislation etc. ? Have you seen how big Tolley's Tax "Handbook" is ? :cool:

I'm not saying doing your own research is a bad idea, I'm just saying that there's no such thing as generic tax advice. Tax advice has to be tailored to each individual, as everyone's personal circumstances are different.

Personally I've managed to deal with a speeding ticket just by reading a forum.

Yes, but a speeding ticket is substantially less complex, and for your average ticket I suspect can probably be dealt fairly easily through the generic advice you find on the internet.

But there's some stuff (tax, IP, employment etc.) that you just can't deal with through generic advice, they are far too complex and circumstance specific. That's why you need a good professional advisor who you trust, and you don't just think is there to rip you off.

MagnusP
16th Aug 2011, 09:27
Have you seen how big Tolley's Tax "Handbook" is ?

mixture; you'll need both the 5-volume yellow tax book for income tax &c, plus the 2-volume orange book for VAT &c. The current edition runs to a total of about 18,000 pages. :eek:

mixture
16th Aug 2011, 12:12
MagnusP,

Well there you go. Thanks for the swift correction and re-enforcing my point !

Spending my off-work time reading and attempting to comprehend 18,000 pages vs paying a professional for an hour or two of their time......

Hmm, tough decision that one.... :cool:

Anyway, I've given far more than the original 2p worth that I came in here to give, so I'm going into lurk mode now !