Rental Tax on Joint Owned Property

Gareth_Malcolm

My wife and her sister jointly own a flat which was bought for them by their parents. Last year the flat was rented out. All the rent money came into our account and then we sent a portion off to my sister-in-law, we kept a portion and then we put another amount aside to pay for the tax. My intention with this was that we would pay all the tax rather than my sister-in-law having to do one herself.

However, we're now looking to do our tax return to pay for the rental tax and I'm not if we've organised this correctly. Does my sister-in-law have to do her own tax return or can we pay it?

In addtion, we're looking to rent out the flat again soon and my wife is on the higher tax band than I am. I have no ownership of the flat except through marriage but was wondering if there was any way to pay less tax on it?

Thanks

xylophone

See http://www.hmrc.gov.uk/manuals/pimmanual/pim1030.htm

booksurr

what the above link means is wife and SIL can split the income and costs any way they want, but if SIL is left with any profit she must declare that herself and pay her own tax. You cannot pay it for her, the same as you cannot pay your wife's tax. After all she may be basic rate whereas wife is HR therefore she my owe less tax than your wife, that is why we have independent taxation

you are not an owner therefore cannot have any share of the rental profit, it is all your wife's and your SIL

if your wife wants to give you an ownership share then she can do so free of CGT as transfer between spouses are on a no gain no loss basis. You would thus become an owner with her original cost figure (ie the price paid by your parents in law). Once you are an owner then the income split between you and your wife must mirror your respective ownership shares

it would of course be wise to make sure SIL is happy with you being added to the ownership, although there is nothing she can do to stop it (assuming there is no mortgage in place?)