Renting out our house, what to do re tax

Tyler_Du

My wife and are lucky in the fact that we are mortgage free on our current house. We are in the process of moving to a new property soon and are going to rent out our current house when we move out. In order to help us my parents have bought half of our current house, they will be getting half of the rent. I work full time and my wife doesn't currently work. Ideally I'd like the rental to be classified as income for my wife only. Whats the best way to do this ? I assume the rent needs to be paid into an account in my wifes / parents name ?

firesidemaid

obviously, you will have to get permission from the mortgage lender and they may want to change it to a buy-to-let mortgage if it isn't already.

also, you will need landlord's insurance and comply with all the legal aspects of renting.

not sure if you can assign the rent as income to one person if others are on the mortgage - you would need advice on this and on reducing future capital gains tax liability.

will your wife register as self-employed?

CLAPTON

is the new property mortgaged

chappers

You could do a transfer of equity to gift your wife your share of the property, but as jimmo says you need to take some professional advice here, you could be setting your parents or your wife up here for some large capital gains, should you come to sell.
As you currently stand if you rented the house out you would get relief on capital gains for the period you have lived in the property(plus the last 3 years regardless of whether it is let or not), plus a lettings relief, plus both your personal allowances(currently £10.100 each).
Your parents would not be allowed the residential relief as it has never been their primary residence. I am not sure but you/your wife may also lose part of the residency relief if you effectively sell half of the house. If you transfered the equity to your wife you would lose your annual allowance should you come to sell.
I assume the reason for selling half the house to your parents is to raise cash to purchase your new home, you may be better off getting them to either loan or gift you the money, but this may raise inheritance tax issues should they not live for a further 7 years(this may even apply should they buy half your house as it may not be viewed as a strict sale and could be viewed as an inheritance tax avoidance tactic).
You really need to take some proffesional advice here.