Last month, we revealed how you, as a buy-to-let investor, could reduce your income tax through Property Partnerships, and now in Part 2 of our special guide, Tax Insider shows you how to go about it in three easy steps. Declaring a Property Partnership Split to HMRCMarital couples who want an unequal ownership split must declare this this to the HMRC. The declaration takes effect from the date it is made, providing notice of the declaration, via Form 17, is given to them within 60 days. It is important to note that Form 17 only covers the assets listed on it, so if you have other properties that you want to be covered, they must also be listed. You will also need to provide evidence of the ownership and the most common forms accepted by the HMRC are: a) A signed declaration by the two parties concerned detailing that ownership of the joint property is split in a specific way. b) Formal property documents that include the deeds of conveyance and bank accounts (to see letters to and from the bank confirming the change). Normally the signed declaration will suffice but be prepared to send in formal documents or to answer any further questions. How to move your property into joint ownership to avoid income tax If you have realised that you can save tax by holding your property in a partnership, rest assured the process is easy and you’ll not incur any capital gains tax liability if you transfer part ownership to your spouse. However, if you transfer part ownership of the property to anybody other than your spouse, then there may be a capital gains tax liability triggered. You can transfer your property into joint ownership in just three simple steps: 1. Contact your mortgage lender. Tell them that you want to transfer the property into joint ownership and explain why. They will send you a new mortgage application form for you to complete in order to move the property into joint ownership. Unfortunately, lenders treat transferring a property into joint ownership as though you are applying for a new mortgage, so you’ll have to submit the same paperwork again and effectively apply for a new mortgage. It is likely that the property will be put into joint names on the same terms as the original contract; that is, if the original mortgage was fixed at 4.99% and had four years left to run on the fixed period, then the new mortgage will also be the same. However, if mortgage rates have reduced, then be cheeky and ask if you can also have it at the new reduced interest rate! 2. Contact a solicitor. Once your mortgage application has been approved, your solicitor will get all relevant legal documents changed into joint names. Tell your solicitor if you want the property to be owned as ‘Joint tenants’ or as ‘Tenants in common’, and how you want to split the ownership of the property. The process usually takes about four weeks to complete. 3. Notify HMRC. If you decide to have an unequal ownership split, then tell HMRC of this split on the Form 17. The Form 17 must be submitted to HMRC within 60 days of the declaration. Don’t delay in notifying HMRC as it could well cost you in tax penalties. How much will it cost to transfer to joint ownership? If you want to move your property into joint ownership, there will be some financial outlay. You can expect to have to pay: • Solicitor fee (normally around £300-£400) • Mortgage lender fee (some charge, some don’t so try to negotiate a waiver) • Stamp duty (possibly payable dependent on the mortgage amount that is being transferred) • Valuation fee (if you’re using the mortgage re-application as an opportunity to release some equity from the property) Do take time to consider the tax savings you will make before you decide to transfer a property into joint names. Try to calculate the cost of transferring the property into joint names and then consider how much income tax you will save on an annual basis.