Tax returns

Cariad71

Hi, my husband and I rent out our old house and until now he has been doing all the tax returns in his name. We've realised that we should do it between us as he pays 40% tax and I pay 20%. Does anyone know if I can declare all the income as mine? Or does it have to be half each? Thanks in advance.

ProDave

I understood it depends on the ownership. i.e. in our case me and my wife are joint owners or the property so rental profit is split between us.

Time2go

Get some proper advise from a tax advisor but if jt ownership you should be declaring it 50/50 unless you submit form 17 to vary that

anselld

Time2go wrote: »

Get some proper advise from a tax advisor but if jt ownership you should be declaring it 50/50 unless you submit form 17 to vary that

Form 17 does not vary ownership.

chappers

Time2go wrote: »

Get some proper advise from a tax advisor but if jt ownership you should be declaring it 50/50 unless you submit form 17 to vary that

True but form 17 has conditions.
For a married couple they must own as tenants in common and there must be a split in the financial ownership in the property. incomes and losses can only be split in those proportions.

As I suspect that you probably bought this house as joint tenants this won't apply.
HMRCs default position is that profits will be split 50:50, so for example you couldn't take all the profit as HMRC would want half of it taxed at 40% from your husband.
Maybe some good news, as your husband has been declaring it all himself there may be an option to back date some of the profit allocation back to you as a std rate tax payer.
You really need to speak to an accountant who is au fait with property taxation

00ec25

Cariad71 wrote: »

Hi, my husband and I rent out our old house and until now he has been doing all the tax returns in his name. We've realised that we should do it between us as he pays 40% tax and I pay 20%. Does anyone know if I can declare all the income as mine? Or does it have to be half each? Thanks in advance.

no you cannot declare it all as yours unless you are sole owner. As you say "our" old house we'll assume neither you nor he are not sole owner, so the key question is do "you" own the old house as:

Joint Tenants? - if yes, then by default any rental income and profit must be split 50/50. There is no other option if you own as JT, and technically your husband cannot take all the income himself. So, as others mention above, there is scope to claim a refund, although if you have not been submitting tax returns in your own name to date, trying to do so now would open a different can of worms

Tenants In Common? - if yes then the default TIC split is assumed to be 50/50 unless you meet 2 additional conditions:
i) you must have submitted a Form 17 to HMRC - you can only claim the split from the date of the Form 17. You cannot back date it and the Form 17 must be received by HMRC within 60 days of the signature date.
https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17
ii) The Fom 17 must be supported by a Declaration (or Deed) of Trust in writing confirming that you share the beneficial income from the property in unequal portions. Patently the % on the DoT must be the same as the % split you declare on your respective tax returns

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1030
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. See:

ICTA88/S282A for years up to 2006-07, and
ITA07/S836 for 2007-08 onwards.
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) - ICTA88/S282A (4)(a), ITA07/S836 Exception D,
- there is actually a partnership - ICTA88/S282A (4)(b), ITA07/S836 Exception C, 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.

Note - if you both owner the property whilst it was your "old home" then do not convert it to sole ownership in your name without having done detailed workings of the CGT implications of doing so since he would lose his claim to CGT private residence relief

Note beneficial ownership (interest) is not the same as legal ownership. If both of you are legal owners then fine, both of you must sign the contract when you sell it. Beneficial ownership on the other hand does dictate both how income from letting is to be shared and also how the proceeds from the sale of the property (and thus your respective CGT liability) will also be split.

Doozergirl

You need proper advice. On face value, the house might be better in your sole ownership for income tax purposes but we don't know your full picture.

00ec25

Doozergirl wrote: »

You need proper advice. On face value, the house might be better in your sole ownership for income tax purposes but we don't know your full picture.

not if by so doing the CGT position is adversely altered

Doozergirl

00ec25 wrote: »

not if by so doing the CGT position is adversely altered

That's precisely why I said they needed proper advice! None of these tax scenarios are straightforward and it's about house values, income and future intentions, not just the present position.

00ec25

Doozergirl wrote: »

That's precisely why I said they needed proper advice! None of these tax scenarios are straightforward and it's about house values, income and future intentions, not just the present position.

I disagree, the scenario is straightforward and has been explained many times on here or the cutting tax board,

They appear to be legally married so it is simply a case of managing the income tax consequences for as long as that is relevant, whilst paying attention to eventual CGT as per #6 above. By all means they should take advice, but not pay excessive £ for advice dealing with a relatively simple issue as this

butters_86

I agree that this is a straightforward case but why wouldn't you use an accountant. My accountant charged my partner and myself £150 each for our BTL's. Why wouldn't you let somebody else do all of the work for that??