Basic tax planning for couple?

Basic tax planning for couple?

10:52 AM, 29th January 2018, About 4 years ago 10

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I understand that the first level of tax planning to undertake is a restructure of our income to optimise all available basic rate tax allowances with my wife, we married on 26/05/06. (Currently these are £45,000 each).

The tax changes to mortgage interest relief will not affect us, as our four flats are mortgage free (Feb 18).

Our joint total taxable income (no mortgage interest will be claimed for 2018/9) is less than £90,000 a year. Note-figure will increase to £50,000 each by the year 2020 (2017 Budget).

Property 118 says that: Restructuring income between spouses is achieved by changing the percentage of beneficial ownership of your rental properties. Also, that it only costs £250 + VAT for each property to do this. Is it really that cheap and simple?

Many thanks


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by Neil Patterson

10:59 AM, 29th January 2018, About 4 years ago

Hi Mark,

Your circumstances would appear to be relatively simple compared to most portfolios, but you haven't really told us very much about each of your personal circumstances and how the properties are owned.
Eg. how incomes are split and if the properties are in sole names, joint tenancy or tenants in common which all makes a difference.

The lack of mortgages does mean that SDLT will not be a factor and there is no CGT between spouses.

Mark is much more of an expert than myself but he can't help in isolation of all the facts which is why he offers his consultations. Please see our tax planning page >>

by Mark Alexander

11:10 AM, 29th January 2018, About 4 years ago

I agree with what Neil has said. For example, if one of you earned £70,000 of that £90k and the other earned the rest then some restructuring would be required for the tax position to be optimal.

Similarly, if the properties are not owned equally as tenants in common or jointly and severally as joint tenants that will also need to be factored in.

The basic rate tax band limit for the 2018/19 tax year is £46,300 by the way, £45,000 is the 2017/18 tax year.

For the 2018/19 tax year the nil rate band is £11,850 and the next £34,450 is taxed at the 20% basic rate tax band.

by Mark W

13:40 PM, 29th January 2018, About 4 years ago

Thanks for your replies.
H taxable income is 35k
W taxable income is 3k
B2L income is 52k
F 1 - H+W joint tenants
F 2 - H sole owner
F 3 - H sole owner
F 4 - W sole owner
My reading of Property 118 is that we should give maybe 90% beneficial ownership of F1 and F2 to W, which would cost 500+VAT. I nearly cannot believe it is that cheap and simple. Would P118 do the paperwork for us?
Kind regards,
Mark Walker

by Mark Alexander

13:47 PM, 29th January 2018, About 4 years ago

Reply to the comment left by Mark Walker at 29/01/2018 - 13:40
Hi Mark

Our fact find would be more comprehensive than the level of detail you have suggested and we would check the math to ensure the optimal position is reached, but in answer to your question, yes we make everything very straight forward for you and we deal with all the paperwork.

The consultation fee is £400 + VAT and results in a written report and recommendation with counsel's opinion from Cotswold Barristers at no extra charge where necessary

The fee for each Declaration of Trust is, as you correctly mentioned, £250 + VAT.

by Robert Taylor

15:17 PM, 29th January 2018, About 4 years ago

Hi, one consideration regarding splitting of the income is:
however you split the income is a once only arrangement with HMRC. If you split it H 10% W 90% and your wife in the future takes on a new job, earning over £45,000 and your income drops below the middle income tax band, you will not be able to change the split back in your favour.
I hope this helps

by Mark Alexander

15:20 PM, 29th January 2018, About 4 years ago

Reply to the comment left by Robert Taylor at 29/01/2018 - 15:17

What's to stop you doing the same thing again in reverse if necessary?

by Robert Taylor

16:29 PM, 29th January 2018, About 4 years ago

Hello Mark.
As I've already said, I am not an accountant. However the advice I was given is, that the declared split to HMRC cannot reversed.
If you say it can be reversed than then so much the better.
Thank you.

by Mark Alexander

16:38 PM, 29th January 2018, About 4 years ago

Reply to the comment left by Robert Taylor at 29/01/2018 - 16:29
Well I’m certainly not aware of any legislation or HMRC guidance which supports what you have been advised. If your adviser has a reference link that would be much appreciated.

Much easier to prove something exists than to prove it doesn’t

by Mark W

16:44 PM, 29th January 2018, About 4 years ago

Thanks for the replies. 90/10 was an example only, not the real splits we would use. I have our real figures and know our income forecasts for the next 5 years. I would do the calculation to suit our circumstances. Would P118 undertake the deeds of trust or do I ask my own Solicitor to do them? (We are updating wills & powers of attorney as well).
I thought that DoTs may be revoked at any time. Please confirm this and hence answer Robert Taylor's point.
Many thanks,

by Mark Alexander

16:48 PM, 29th January 2018, About 4 years ago

Reply to the comment left by Mark Walker at 29/01/2018 - 16:44
Hello Mark

Yes Property118 Limited can produce the DoT’s on an “execution only” basis, ie not advised. On this basis the consultation fee would not be payable.

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