Splitting tax (again)

[Martin_y]

Hi all

I've read a post on here, and have also been told, that it is possible that my wife and I can split the rental income on our returns at a ratio different to 50/50.

I am on a higher tax rate, so it would make sense to declare more of the income on her tax than mine. I am thinking of a 40/60 or even 70/30 split.

How do I set this up, though? do the deeds need changing? the mortgage?

... or , can I just add a note to our returns explaining that there is a split, and how we have split the income?

Thanks!

[Trenners]

Hi Martyn,

It depends whether you own the property as "tenants in common" or jointly. You would have been asked to decide how you wished to own the property by your solicitor during the conveyancing process.

If you jointly own the property then you own it "50/50". If you own it as "tenants in common" then you initially own it as 50/50 but, via a document called a "deed of trust", you can allocate your percentages differently. This is, of course, very tax efficient.

So, assuming "tenants in common" ownership, create a deed of trust (this document is available for download over the Internet for a nominal charge) and change the ownership percentages accordingly. eg: 90/10 or even 99/1.

Once you have created a deed of trust then you should report all income and expenditure to HMRC in the percentages agreed when completing the annual self assessment returns.

Hope that helps ....

Mark

PS: I am a landlord & letting agent - not an accountant - so you should check the above information with your accountant.

[Martin_y]

Hi Martyn,

It depends whether you own the property as "tenants in common" or jointly. You would have been asked to decide how you wished to own the property by your solicitor during the conveyancing process.

If you jointly own the property then you own it "50/50". If you own it as "tenants in common" then you initially own it as 50/50 but, via a document called a "deed of trust", you can allocate your percentages differently. This is, of course, very tax efficient.

So, assuming "tenants in common" ownership, create a deed of trust (this document is available for download over the Internet for a nominal charge) and change the ownership percentages accordingly. eg: 90/10 or even 99/1.

Once you have created a deed of trust then you should report all income and expenditure to HMRC in the percentages agreed when completing the annual self assessment returns.

Hope that helps ....

Mark

PS: I am a landlord & letting agent - not an accountant - so you should check the above information with your accountant.

Very very helpful !

I guess I cant setup the doc now, and backdate it? I am guessing we'd have to pay 50/50 tax up until the date of the doc then?

[Trenners]

Hi Martyn,

The deed of trust should be dated, signed and witnessed. It is probably easiest to create a deed of trust from the start of a new tax year as that will make the self assessment return calculations the simplest .......

It would not be advisable to back date it ....... as HMRC might not take kindly to that!

Good luck,

Mark

[Martin_y]

Thanks for all the help.

Ok, we are probably not going to be splitting it for now.