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Benefits of holding buy to let as Tenants In Common

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buy to let as Tenants In Common

Should I structure my buy to let as “Tenants In Common”?

Should you structure your buy to let as “Tenants In Common” is a good question.

Tenants In Common” is one of the most useful tools from a financial planning perspective including buy to lets. Detailed tax advice should also be sort from an Accountant or Solicitor.

I’m a Buy to Let Mortgage Broker and see it as my responsibility to inform you of the options open for you to explore; including “Tenants In Common”, so you can make an informed choice.

The matter of choosing buy to let as “Tenants In Common” only arises when there are more than one mortgage applicant or persons on the title deed.

There are two ways to structure buy to let ownership:

  • Joint tenants: where on death 100% of the property (and mortgage) passes to the survivor.
  • Tenants In Common: where the percentage owned (and mortgage liability, proportionately) passes to the deceases estate.

Advantages that might arise when holding Buy to Let as “Tenants In Common”

  • Tenants In Common still means all parties are owners. So rather than just say “I’ll register the property in my Spouse’s sole name as they are in a lower income tax bracket” – you maintain control.
  • If you are buying jointly the percentage of ownership can be adjusted in favour of the lower income tax payer.

For example:   Mortgage Applicant One is a 40% tax payer and Applicant Two is a 20% tax payer.Under Tenants in Common: Mortgage Applicant One takes 10% share of the property and Applicant Two 90%.The tax liability will be 10% of the profit @ 40% tax rate and 90% of the profit @ 20% tax rate.So the overall tax liability when compared to Joint tenancy which would default to 50% @ 40% tax and 50% @ 20% tax.

  • The buy to let mortgage provider might offer a favourable stress rate rental calculation to take into account the split of tax brackets, as they know your profit will be greater, which would enable you can borrow more.
  • With the use of a Will you can pass the share in the property to whoever you choose. For instance to your children to keep the property in family – whereas a joint tenancy Spouse could remarry.
  • On death pass the share of property into a Discretionary Trust so your Spouse (and family) may still receive use but may have one less asset for means tested state benefits.

To conclude structuring a buy to let as “Tenants In Common” provides greater flexibility than “Joint Tenancy” and should be discussed fully with your Tax Advisor and Solicitor in detail ahead of mortgage completion.

Niche Advice offers appropriate advice for buy to let applicants looking for mortgages including those who have decided that Tenants In Common is the route for them.

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Author: Richard Stokes

Richard Stokes is a partner at Niche Advice who are whole of the market Independent Finance Brokers In London. His role is very much focused on on Mortgage and Insurance products.

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