How do we make use of our tax free allowances: renting our old house in Scotland

gizmo2511

Hi,

My wife and I recently moved to London, when we did we retained the house we lived in in Dundee and let it out and bought a new house in London. I am now earning just over the higher tax threshold, however my wife is not working; to that end we would like to investigate if there is a way of ‘allocating’ the rental income to her so we make use of her tax free allowance. Otherwise worst case scenario we could lose around £1k a year in income tax on my half of the rent.

I have read various pieces of information about things like beneficial interest, deeds of trust, tenants in common, tax form 17, but I’m not clear on how this works under the law in Scotland.

Here is some information about the situation.

First Property (in Scotland, now rented out)
bought in 2006 for £89k
current mortgage £55k
rental income £8k pa gross, £5k pa net of fees, VAT and mortgage interest

Second Property (in London, current residence)
bought in 2011 for £220k
current mortgage £200k

We would also like to find out if we can allocate some of the mortgage on our home to our ‘rental business’ (as it is currently using equity that would otherwise have been used to reduce the mortgage required to by our current home) in order to further reduce the taxable profit on the income.

And finally there is the concern that if/when we sell the property in Scotland if my wife has, say, 99% we would not be able to use my Capital Gains Tax allowance against the sale proceeds and we’d end up paying more CGT than we otherwise would.

Hope you can help, any pointers would be really appreciated