who fills the self assessment on rental income from joint property?

jackson43_2

If my wife and I own a property that we rent out who fills out the self assessment? Do we have to split the income and do one each?
Or can I just put it in one of our names?

Werdnal

If joint owned, tax liability is 50/50.

00ec25

as you are a married couple it depends on how you own the property

A) if you hold it as joint tenants then you are required to split the income 50/50

b) of you hold it as tenants in common then you are required to split it in accordance with your actual individual shares

as a married couple you can transfer ownership between spouses without any tax implications but this must be recorded on the land register so you must transfer the actual ownership in legal terms not just notionally. Ie she could become the sole owner becuase the joint tenancy is dissolved or she could become the majority owner if the TIC portion is changed - be aware that if she become sole owner it will have an impact on the eventual CGT position as you would lose your allowance

jackson43_2

ok thanks. what would hrmc do if we had only been paying tax through my wife?
secondly if we do joint SA do we just half everything ie half the rent income but also half the tax detuctables like mortgage payments?
thirdly when we sell it one day how do they kno we have been paying tax on the property? I just dread them saying we've not paid tax on the rental property when we have. does this issue ever happen and how can you prove it?

ognum

Presumably you keep tax records of your self assessment. If you wife is a lower rate tax payer why do you not simply hold the property in her name, of course you can do this if you have a mortgage in joint names!

You could employ an accountant which is tax deductable who would also keep your tax records!

jackson43_2

i realised i may not have mentioned we are both 40% tax bracket payers, my wife earns less but i prefer the rental income in her name just because she has SA already set up so it would just allow ease of continuity. surely if we are still in the 40% bracket the taxman isn't bothered if its my name, the wife's or joint?!

silvercar

we just half everything ie half the rent income but also half the tax detuctables like mortgage payments?

Is what we do.

One spreadsheet, with the bottom line half of everything that we both enter on our tax returns. From memory there is a box where you say you are only entering your share and name the other share owner

ognum

I'm sorry to say I think they are bothered but why don't you phone the HMRC helpline?

IMO its better to get things right for HMRC that way you sleep at night!

Thrugelmir

jackson43 wrote: »

does this issue ever happen and how can you prove it?

Yes often. In fact the HMRC have created a unit recently which became operational this month to detect undeclared income.

The HMRC can assess you for the tax liability. Then up to you to disprove the assessment. Once the assessment is older than 6 years there's no right to appeal. The liabilty can be backdated to when the property was first let.

So besides the tax. There's tax penalties, interest on the tax and fines for non submission of self assessment forms.

I recall a case many many years ago where the individual was made bankrupt as never had declared income from 4 let properties.

jackson43_2

i may not have made my last post clear. I wasn't wondering if people were caught not paying tax, i was wondering if hmrc ever saw a property sold which had clearly been rented and then accused the sellers of not paying tax when they had? ie how do they link a property and its owners to the tax being paid on the rental income? How do they know that when we pay tax on rental income that it is for a certain property? I'm guessing that maybe the self assessment asks for the address you are paying the taxes on?Therefore they don't necessarily look at the names of the owners but they look at the property address and if rental tax is being paid on this property address?

silvercar

jackson43 wrote: »

i may not have made my last post clear. I wasn't wondering if people were caught not paying tax, i was wondering if hmrc ever saw a property sold which had clearly been rented and then accused the sellers of not paying tax when they had?

Their immediate concern would be capital gains tax on the sale. From that (as depts do talk to each other) there would be the question of income tax on rental income, failure to declare, incorrect self assessment.

Apparently hmrc do look at sold property lists from other government departments eg land registry.

ie how do they link a property and its owners to the tax being paid on the rental income? How do they know that when we pay tax on rental income that it is for a certain property?

They don't directly. You would be registered as the owner at land registry and you should have your contact address registered with the Land Registry.

I'm guessing that maybe the self assessment asks for the address you are paying the taxes on?

It doesn't - though taxpayers are expected to keep records.

Therefore they don't necessarily look at the names of the owners but they look at the property address and if rental tax is being paid on this property address?

I don't think it works like that.

You have an address (normally your home) which is registered with hmrc, your bank, your employer etc. It would be foolish to register a rental property as your home address with hmrc!

Remember also your tenants will be using the rental property as their official address