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The tax consequences of changing the shares in a buy-to-let property.
My clients are a married couple who jointly own a buy-to-let property worth about £600 000 with a mortgage of £200 000. At present they split the net rental profit equally.
This situation is not ideal because the husband is a higher rate taxpayer and the wife is not. The impending changes to relief for interest have focused their attention on the need to improve the tax position. It is clear that they can change the ownership to a joint tenancy and alter the percentages to say 95:5 without capital gains tax or inheritance tax consequences. My question is: what happens to the mortgage?
The lender will require the husband to continue to be a party to the loan. Can a joint mortgage be divided in unequal shares and would those unequal shares automatically match the interests in the property?
If so it would appear that...
