BTL income - transfer to spouse?

pinklady21

Hi everyone
Hope someone can help.
I pay tax at 40%. My spouse pays tax at the lower rate 20%(?).
We got married last year.
I have a buy to let flat in my own name. I am currently liable for tax on the profits at 40%.
Is it possible to transfer the profits to my spouse, so that the tax liability is reduced to the lower rate?

I have heard about a 'married persons tax allowance'. Does this still exist? Can either party claim it? and how?

Many thanks!
Kind regards

Pennywise

To get the profits taxed on her, you have to transfer ownership of the property. Do you really want to do that? For married couples, profits are taxed in proportion to the equity ownership.

Married couples allowance is only available to people who are,without checking, probably over 70 or 80 years old. Not available for anyone younger.

Pennywise

To get the profits taxed on her, you have to transfer ownership of the property. Do you really want to do that? For married couples, profits are taxed in proportion to the equity ownership. You can give her a half share and then profits are taxed equally between you which will help without you giving it away. Don't forget that you may lose out on capital gains tax reliefs if you previously lived in the property, i.e. private residence relief and lettings relief, if you give it to her, meaning a far higher capital gains tax liability when it's eventually sold.

Married couples allowance is only available to people who are,without checking, probably over 70 or 80 years old. Not available for anyone younger.

pinklady21

Many thanks for that.
Still working through the income tax implications - I hadn't even got as far as CGT yet.....good point though.


I think on balance, as the profits are not enormous, I will just pay the tax at 40% in the meantime, as it keeps things simple.

I am about to advise the HMRC about the letting property so that I can pay the tax due. What typically do they need to see as evidence when calculating the tax?
The HMRC website says that if the profits are under £2500 a year (which they are) I don't need to fill in a tax return.

So what do I need to send them?
I am assuming they need a copy of the lease, receipts for insurance etc and a letter from me detailing the amounts?

Thanks!
Kind regards

Regshoe

This link should explain what you need to do:

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10013435

In particular make sure you are claiming every expense you can (don't forget wear and tear if it's "furnished").

I wouldn't expect you to have to submit any records initially you just fill the figures out on the P810 HMRC send you (or if your profits were higher then on your Self Assessment form).

The important thing is to make sure you do keep the records and have them available if required.

pinklady21

That is most helpful - thank you!