Q on taxes

[randal_bond]

Hi,

we're a couple with joint ownership on our properties. I don't work anymore but my partner does. Does it mean that the calculated tax figure is halved between us, so that my partner pays tax on half of our profit or my tax allowance is used up first, and then we pay tax on what remains? Thank you.

 

 

[Richlist]

The default position for jointly owned property is 50:50 each.

However there can be a distinct difference between the legal ownership and the beneficial ownership. It's perfectly ok to own a property 50:50 but to then split the beneficial ownership to anything up to 1:99.

To do this there are some documents to complete and register and its best to see a solicitor who deals with property. The cost is likely to be a couple of hundred pounds.

[randal_bond]

Thanks. I am talking about 2015-2016. Will it be too late to register it now? Can we apply for beneficial ownership if we bought the flats while already married? Is it possible to do it without a solicitor at all? 

[Richlist]

 I think you are to late for 2015-16 as I don't think you can back date to a previous tax year. If you do it now I believe you can apply it to the whole of the current tax year 2016-17, but your solicitor or accountant should be able to advise you.

You don't apply for beneficial ownership, you already have it at 50% each. What you will be applying for is to vary the split to whatever you want, say....30:70 10:90 1:99 etc.

It doesn't really matter when you purchased the property. Presumably the property is registered in joint names and profits have been taxed at 50% each up to now.

Don't know if it can be done without a solicitor involved at some point of the process. In any event you would have to know how and subject yourself to a higher risk of it going wrong......all for £200. Hardly worth it is it ? Your tax saving will potentially save more than that in the first year.

[randal_bond]

Thanks, Richlist. Very clear.

[Carryon Regardless]

A thought,

if you declare yourself as self employed, and charge the property for your efforts, as say administrator, agent, or such, you reduce the shared net profits and end up with personal profits to be taxed on.

 

Any issues with that theory?

[Richlist]

Yes there are issues with that.

You are not allowed to charge for your own time that you spend running your business. 

There may be ways around that and you would need to check with your accountant or solicitor. But I suspect varying the beneficial interest as described above will be the most cost effective.

If a property is jointly owned with one paying 40% tax and the other paying 20% having a 1:99 beneficial income split is very tax efficient.