Can I cut out the Taxman?

spidystrider

I have this question in the property section but received no answers, so I thought I'd try here.
My husband and I have jointly owned a flat for 12 years now. My husband works full-time and pays 40% tax. He is also the landlord for the flat and pays tax on the rental income. I do not work, have no income and pay no tax.
I would like to take over his job as landlord and use the £3,600 rental as my income. As it's under the £6,000 bracket, it will then be tax free? Is this right, can I just become the landlord or would the flat have to be owned solely by me to make it's income tax free? Hope that makes sense. I'd be grateful for any advice given.

fengirl_2

As the property is jointly owned, the income should be shared between you for tax purposes and you each declare half. What is the reason for your husband declaring all the income as his own?
He should amend his tax returns for the past 6 yrs so that only half the profit is declared, leaving the other half for you, which would be covered by your tax free allowance.

spidystrider

We obviously haven't a clue what we're doing My husband has just always treated the income as his and has paid taxes on it. We are losing out quite a bit tax wise. My hubby does a lot of overtime, which is expected of him. This just takes him into the 40% tax bracket. It sometimes feels we would be better off without the overtime, he would pay less tax and have more time with the family, but this isn't a choice he has.
Could I become the landlord and claim all the income as mine? If so would the flat have to be put in my name alone?

Mi_bargains

Hi spidystrider, you cannot just become the landlord if the property is only half owned, if you own all of the property then any income you receive is classed as yours, so the flat would have to be on your name only.

The first thing I would do is to get your husband to call his tax office and ask them to send you copies of the last 6 years returns with details of all of the property income he has declared, HMRC will send you this information, it is a request they get all of the time and it shouldnt take that long for them to access this info.

Then all your husband has to do is send a letter to his tax office saying he has made a mistake on the property income pages (due to the property being jointly owned), he will have to detail the correct amount for each year. In the letter he should ask for the last 6 years to be re-assessed.

If he has been a higher rate taxpayer for the last 6 years then you could be looking at a refund of approx £4k (will be around £2k if he was a basic rate taxpayer). This sounds like a nice amount to have refunded off the tax man (for making a telephone call and writing a letter), tell your husband that it will not make a difference to how the tax man views him as they often get requests for refunds much larger than this amount.

If he is still unsure what to do then you should seek advice off an accountant.

spidystrider

Thanks so much for the information, I'll show it to my husband and get him to do what you advice. I will definately look into having the property in my name only, I expect I'll have to contact our solicitor about that.

Voyager2002

Ask the tax office your original question. When I was in your position I did so, and was told that you could indeed choose to receive the rent and so make the most of your personal allowance. However, that was in 1993 and so the rules may have changed since then.