Joint owners but with different entitlements to rental income
I have a few properties owned jointly with my wife and have always split the rental profits 50:50. However, my accountant suggested for tax planning (I am a higher rate taxpayer and my wife is a non-taxpayer) all the income should be allocated to my wife. To do this, all we need to do is open a bank account in her sole name, transfer the rental income and the mortgage costs etc across to this account then 100% can be shown to be hers. Don’t even need to inform HMRC.
However, I noticed some articles regarding completion of Form 17 for HMRC and notifying them of the transfer of income. Also some reference to SDLT and CGT, although no CGT should be due as none of them have increased in value.
I trust my accountant but the articles suggest the advice is different.
Apologies if this has been raised before but can anyone assist or point me in the right direction?
David
Comments
Have Your Say
Every day, landlords who want to influence policy and share real-world experience add their voice here. Your perspective helps keep the debate balanced.
Not a member yet? Join In Seconds
Login with
Previous Article
Potential tenant on disability benefit?Next Article
Section 8 or Tenant from Hell?
Member Since August 2014 - Comments: 8
1:45 PM, 29th March 2016, About 10 years ago
My understanding is that if the property is owned 50/50 the HMRC will treat any income on a 50/50 basis no matter how you try and split it up!
Member Since September 2013 - Comments: 217
1:55 PM, 29th March 2016, About 10 years ago
I think you need a professional tax accountant. My understanding aligns with Adrians. And I think you can read all about it on the HMRC website.
Member Since April 2014 - Comments: 306
2:10 PM, 29th March 2016, About 10 years ago
If owned jointly & remaining that way, then there’s no question over CGT or SDLT & the income can be split eg 99% your wife & 1% you, especially if it is your wife doing most if not all of the admin work / overseeing of the properties.
Member Since February 2015 - Comments: 46
2:18 PM, 29th March 2016, About 10 years ago
Income should be split 50%-50% unless you notify HMRC that you have a different arrangement. Check with you accountant, who I suspect has suggested an easier way, which may not stand up to an inquiry by HMRC, and read the HMRC Manual or other publications.
In brief – it can be done but should be done properly
Member Since February 2016 - Comments: 39
2:27 PM, 29th March 2016, About 10 years ago
I have asked my accountant the same question, and he said that HMRC are quite clear on this. The income is treated 50:50 if the property is owned 50:50
Member Since February 2015 - Comments: 46
3:13 PM, 29th March 2016, About 10 years ago
I have referred you to HMRC manuals.
Laura has stated that you can split the income regardless of the the percentage owned (remember that transfers of ownership between spouses are tax free).
Mike has referred you to HMRC manuals.
What more can we say!
Member Since August 2014 - Comments: 46
3:16 PM, 29th March 2016, About 10 years ago
The rental income could be divided between joint owners in any share you like: 50/50, 10/90, 1/99 %. You need to have a declaration of trust to show this share as beneficial interest or have tenancy in common with above share. You than need to inform HMRC with form 17 and copy of declaration of trust. I believe you could do the declaration of trust yourself and there are some DIY available online. However it is best to approach a solicitor for this. They generally charge around £250 for this.
Member Since November 2013 - Comments: 176
3:35 PM, 29th March 2016, About 10 years ago
I am interested in the same issues, but in our instance my partner and I (20 yrs on are not married) and live in separate dwellings both jointly owned in differing proportions. Do the rules differ if married or not?
Still working on my accountants tardy response.
Member Since May 2014 - Comments: 8
5:14 PM, 29th March 2016, About 10 years ago
Hello David
Your Accountant is correct. you can elect a person to receive the rental income . I do that for my brothers property.You cannot do it for the CGT that has to be separately. That has been reducted in the last budget which is good. Hopefully the properties will increase in value.
Regards Pat
Member Since February 2016 - Comments: 39
5:42 PM, 29th March 2016, About 10 years ago
how exciting! I shall challenge my accountant then as this move could help with the removal of mortgage tax relief.
On the CGT – unfortuately the one exception he made on the new reduced rates was residentioal property….