reducing income tax using wife's allowance

jovizak

Hi, I currently have my main residence which is mortgaged, in which i live with my wife and daughter.I am a Born UK resident and my wife moved here a year ago from Russia. We now have a daughter, so my wife currently does not work but is allowed to work on her current leave to remain visa, and one assumes will be eligable for an income tax allowance. I have another house which i have refurbished which is paid for and no mortgage at the moment but i will need one on it soon. It is a bigger house and we would like to move there and rent out my current main residence. We can only make this affordable/ comfortable if the rental income from the smaller house has low or nil rate of tax. As my wifes income is nil, I am wondering if and what I can do to, in effect, divert the rental income to her income allowance. Hopefully that will also eliminate the need for me paying 40% tax as i am at about 36k a year income myself.
Does anyone have any ideas and know what would be involved to make this achievable please?

McKneff

You cant, income tax is personal to you.

Give the house to your wife, it would be a different matter then. The income would be going to the person who
owned the house then

ognum

Income tax on the rental property will be laud according to the percentage owned so you wife to claim the rent against her personal allowance she needs to own 100% of the property.

jovizak

Wow that was quick and thank you for the comments, I have no problem signing over the house per say, its a good idea, I just wonder what the implications will be when dealing with the mortgage. I wonder if i am allowed to Gift the property if there is a mortgage on it, and it is at a good rate at 1.59 so it would have been nice not to lose the rate if it had to be re-mortgaged, if indeed they would allow my wife to have the mortgage in her name, as she has only been here a year and will have a poor credit rating etc etc !

ognum

jovizak wrote: »

Wow that was quick and thank you for the comments, I have no problem signing over the house per say, its a good idea, I just wonder what the implications will be when dealing with the mortgage. I wonder if i am allowed to Gift the property if there is a mortgage on it, and it is at a good rate at 1.59 so it would have been nice not to lose the rate if it had to be re-mortgaged, if indeed they would allow my wife to have the mortgage in her name, as she has only been here a year and will have a poor credit rating etc etc !

You cannot gift a property if it is mortgaged in your name. You wife would need a mortgage in her name and I believe from what you have said it is unlikely she will get one.

maybe the answer is to leave your rental property mortgage free and sign it over to your wife and then take a mortgage on your new home!

Kynthia

If your wife never lived in the property while it was in her name then it is possible you will no longer qualify for PPR relief and lettings relief on the capital gains tax. You should try to consider the affect on all possible taxes when making decisions.

jovizak

Again thanks for the comments, i may get in toch with the morgage company and see if they would be prepared to have my wife on the mortgage as if i had to re-mortgage or pay off the mortgage etc it would be likely they would lose my custom. You never know it may help to swing things! Indeed we do intend on living there untill we are ready to rent out so if we decide to sell later we may still get some PPR.