Rental income question

Ron_Weasley

Hope someone would be kind enough to answer a quick question?

My wife and I are planning on buying a second house as an investment and to generate some rental income.

I am a 50% tax payer and my wife is a basic rate tax payer, so we would like her to be the recipient of the rental income so that we are paying only 20% tax on the net profit after allowances, not 50%.

My question is, does she have to be the sole owner of the property in order for us to do this? Or can we own it jointly and still say she receives 100% of the revenue?

Thanks in advance for any advice.

somethingcorporate

Ron, if this is likely to be a long term venture perhaps you should seek the advice of an accountant who would be able to advise on the best way to structure your finances for tax purposes.

Ron_Weasley

somethingcorporate wrote: »

Ron, if this is likely to be a long term venture perhaps you should seek the advice of an accountant who would be able to advise on the best way to structure your finances for tax purposes.

Thanks - and I am sure it will come to that.

I was just after a quick yes or no answer to the question though. Does anyone know the answer?

somethingcorporate

Not specifically, sorry.

If you own it 50/50 you would pay a blended rate of 35% not the full 50% (and there are a whole bunch of ways to mitigate the "profit" figure on which you would pay tax).

Ron_Weasley

Thanks again.

Anyway, just to update the thread in case it's of interest to others, I spoke to my solicitor who although is not a specialist tax consultant, said that she is "fairly positive" that the house does not need to be wholly owned by my wife in order for her to be the sole recipient of the rental income for tax purposes.

I asked her how sure she was and she replied, "well it's what me and my husband do! We have a property in both our names but I receive and declare all of the rental income". As a qualified lawyer, you would hope she knows what she is doing!

chrismac1

Jointly owned property - husband & wife or civil partners

http://www.hmrc.gov.uk/manuals/pimmanual/pim1030.htm

I advise clients who wish to vary the split from 50-50 to put the correct arrangements in place to avoid HMRC challenge.

00ec25

yes it is possible to have it in shared ownership and "receive" income disproportionately

the Income Tax rules are covered by the concept of the "declaration of trust" which, as your solicitor appears not to have mentioned, then your accountant can certainly advise/arrange

a declaration of trust has no impact on the CGT position - you each will retain the right to claim the full personal allowance when you sell