Sharing rental income with my husband?
The income from our five rental properties currently comes to me, as my husband was a higher rate taxpayer, but I would now like to share the rental income with him. I left work last year and then a month later, my husband was made redundant. He decided not to get another job and to take early retirement. We are going to use the rental income to live on until our pensions kick in, in 5/6 years.
It would therefore seem beneficial for the ownership of the properties to be split 50/50, as we will then pay less tax. The first already has my husband’s name on the mortgage but has a Deed of Trust in place for the two children, which will be removed in a few months’ time, when the mortgage is repaid and their names go on the deeds. We will all own 25%. The second has no mortgage, and was bought in both names, but there is a Declaration of Trust in place stating that I am the beneficial owner. T17s were sent to HMRC for both of these properties. The other three were all bought and mortgaged in my name.
I believe that the Declaration of Trust for the second property can be removed and the income will then be split 50/50 for tax purposes. My accountant has suggested that the best way to transfer the three mortgaged properties to joint names for tax purposes, is via a Declaration of Trust so that we don’t have to add my husband’s name to the deeds. As the properties are mortgaged, I understand that this will incur SDLT.
In a few year’s time, we would like to gift one of the mortgaged properties to each of the two children (which may, or may not be mortgage-free by then).
Is this the best way of sharing the rental income with my husband now, or should we be considering other options, given our long-term goals?
Many thanks
Sally
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Member Since January 2022 - Comments: 61
9:20 AM, 10th July 2022, About 4 years ago
Husband and wife 50/50% joint owner landlords. Both 20% taxpayers.
Can either of them declare the whole rental income to HMRC or MUST BOTH each declare 50%.
Member Since January 2011 - Comments: 12212 - Articles: 1408
9:34 AM, 10th July 2022, About 4 years ago
Reply to the comment left by CYRIL STALEY at 10/07/2022 – 09:20
Without following procedures to change the ownership split they are automatically required to report income and expenses 50:50
Member Since February 2020 - Comments: 21
8:38 AM, 13th July 2022, About 4 years ago
Reply to the comment left by CYRIL STALEY at 10/07/2022 – 09:20Approx 2 years ago my wife took redundnacy and retired but receives no pension yet. I wanted to use her tax relief by giving her the rental income. I legally transferred 50% of the property into her name but It appears that I can have all the rental income, all taxable as I get a pension, but she can’t. We have to share it meaning we cannot use her full tax relief. Maybe if I had put it all in her name it would have worked. At the time we were going to buy another so it would have sorted itself but circumstances have changed so that’s not going to happen.
Member Since January 2011 - Comments: 12212 - Articles: 1408
8:56 AM, 13th July 2022, About 4 years ago
Reply to the comment left by Tony Clements at 13/07/2022 – 08:38
Hi Tony
Based on what you have said, if you had contacted us two years ago, you and your wife would have saved far more tax by now that we would have charged you to set up your property ownership for optimal tax efficiency. Sadly, we cannot turn back time.
Member Since July 2022 - Comments: 1
2:27 PM, 13th July 2022, About 4 years ago
My husband and I have a buy to let in both names. He is a tax payer, I am not. Can I claim all against my Tax?
Member Since January 2011 - Comments: 12212 - Articles: 1408
3:16 PM, 13th July 2022, About 4 years ago
Reply to the comment left by Caroline Martin at 13/07/2022 – 14:27
The linked article below should answer your question
https://www.property118.com/tax/splitting-rental-income-for-tax-planning-purposes/