tax on rent

[Temeraire]

my wife and I jointly own a house, can all the income be paid to her as she is a non tax payer. the tenancy agreement has not been issued yet.

[Chestnut]

Not according to UK HMRC Rental Property toolkit 2013 2014. (Google it) See under Checklist item 3 and follow the link for Joint Ownership.

It states that profit or loss on tax returns should be divided according to share of property - normally 50/50 unless deed of ownership specifies otherwise.

I looked into this some time ago and concluded that financial benefit outcome of a change to deed was not worth costs and hassle to do so. I think it would probably affect inheritance and CGT at sale also.

(If I am wrong, would someone with superior knowledge of HMRC rules let me know!)

[Carryon Regardless]

I am of the opinion that husband and wife can transfer between themselves as they please, without any tax consideration.

Aside from that, if the property business were to pay all profits to a management business then there would be zero profits for the property business to be taxed on.

If the wife is that management business then that business will then have the profits to be taxed, after the personal tax free allowance.

[Richlist]

Temeraire (.....reminds me of HMS Temeraire from the battle of Trafalgar that served during the French Revolutionary and Napoleonic Wars) & others: these posts raise a number of issues:

* The automatic default used by HMRC is 50:50 for joint & beneficial ownership. Beneficial ownership can be varied up to 99:1. The costs for the deed and submission of the forms is a couple of hundred pounds and it remains 50:50 until the documentation & HMRC are happy with the submission. Anyone can easily work out their tax liability for each scenario and judge which is best for them.....normally the tax savings far outweigh the cost of setting up.

* My understanding is that in law their is a distinction between joint property ownership (which remains in equal shares) and beneficial ownership ( the person receiving income from the property) which can be varied in any combination up to 99:1

* My understanding is that it doesn't affect IHT or CGT because the property ownership remains in equal shares and the tax allowances & liabilities for CGT are equally shared.

* Transferring rental income into a non limited company has no advantages as the recipient will pay the same level of tax on the profits......however many company's the money is paid thru. Forming a Limited company means paying corporation tax on profits (10%) and the remaining money/profits then belong to the Ltd company. Taking it out of the Ltd company makes it liable for income tax (another 20% or 40%) unless you take it in dividends which can get very complicated & messy and the whole process is rarely worthwhile unless you have a large portfolio of properties.

[Temeraire]

Thankyou all for your answers, I feel a visit to an accountant with experience in this will be worthwhile.

[Chestnut]

Please let us know your outcome.