Tax on lettings

ognum

I have inherited a house that I plan to let I am a basic rate tax payer my husband is a high rate tax payer

Should I transfer into our joint names so that when we sell we can both share the capital gain and he can then give 100% of rent to me as my income or should I keep the house solely in my name for tax purposes

Can you gift the rental income to your spouse on more than one house if we choose in the future to buy another house to let?

CLAPTON

if you're married HMRC deem the rent to be distributed as per the ownership; so joint ownership will be 50-50% rental distribution

ognum

CLAPTON wrote: »

if you're married HMRC deem the rent to be distributed as per the ownership; so joint ownership will be 50-50% rental distribution

Does this HMRC form 17 apply?

http://www.hmrc.gov.uk/forms/form17.pdf

CLAPTON

yes

so if you hold the property (e.g. ) as tenant in common with a 90%-10% split then you can split the rent in the same proportion by filling in the form; otherwise the rent will be deemed split 50-50

Pennywise

ognum wrote: »

Does this HMRC form 17 apply?

http://www.hmrc.gov.uk/forms/form17.pdf

Only if you don't "own" the house in equal shares, i.e. if you get the solicitor to transfer ownership so that, say, you have a 75% share and your spouse the other 25%, then you'd be taxed on 75:25, BUT likewise the capital gain would be based on 75:25 unless you changed the ownership percentages before you sell it.

ognum

Pennywise wrote: »

Only if you don't "own" the house in equal shares, i.e. if you get the solicitor to transfer ownership so that, say, you have a 75% share and your spouse the other 25%, then you'd be taxed on 75:25, BUT likewise the capital gain would be based on 75:25 unless you changed the ownership percentages before you sell it.

So if we change the ownership at sometime in the distant future when we seel can the CG only be used for the time since the change Likewise if at that time I put the ownership into more peoples (childrens) names could we use their CG of course they would have a share of the proceeds too!

CLAPTON

children under 18 can't own property
giving property to anyone other that your spouse counts as a disposal for cgt purposes

ceeforcat

ognum wrote: »

So if we change the ownership at sometime in the distant future when we seel can the CG only be used for the time since the change QUOTE]

HMRC will challenge if change of ownership is simply a vehicle to avoid tax e.g. place in joint names just before sale. (I have one of these challenges on my desk right now!) Solution is to do so well in advance of even marketing the property and keep good documentation.

http://www.taxexpert.co.uk/property_tax/cgt_property.php

antrobus

See PIM1030 - Introduction: jointly owned property & partnerships at http://www.hmrc.gov.uk/manuals/pimmanual/pim1030.htm for the 'official line' on such things. The relevant section states;

Jointly owned property - husband & wife or civil partners

Husbands and wives or civil partners living together should generally be treated as entitled in equal shares to income from jointly held property...However, this rule will not apply in any of the following instances:

* the income is earned income (or, like furnished holiday lettings, treated as earned income)
* there is actually a partnership - in this case the income is divided according to the terms of the partnership agreement,
* both husband and wife, or both civil partners, have signed a declaration under ICTA88/S282B or ITA07/S837 stating their beneficial interests in both the property and the income arising from it, but a declaration is only valid if their interests in the income and in the property itself correspond.

ognum

Thanks for these relpies all food for thought!