New £1000 property allowance

cdbe11

Hi, fed up of the pecking so doing tax return. I rent out 3 cheap properties, never managed to get above my allowance until 17/18 so previously just put gross rent on return, eg 15/16 - £9000, 16/17 - £9300 with nothing to pay.
I have no other income, I've transferred my marriage allowance to wife and we have a deed/form 17 with HMRC to split income 99-1.
In 17/18 I've received £16,820, less £2000 expenses so around £14,820 net.
I've just read about the above allowance so think I should be increasing the split to my wife to reflect this?
Is this correct?
How do I do it? - do I send a new form 17 to change her share to eg 5.9% (£992), then do my calculations on £15,828, do I deduct 84.1% of the expenses on my return?

If this is vaugely correct can I do the form 17 change retrospectively for 17/18 now?

Really grateful for any advice.

Pennywise

You actually have to change the legal ownership percentages. Form 17 only advises HMRC of the legal split - it doesn't actually change the split, for which I think you'd need some kind of legal ownership transfer document, which couldn't be backdated.

cdbe11

Hi and thanks, we had a deed to do that, which was accepted in writing by HMRC - I'm sure we can just submit a new one with the revised percentage , but as you say any change is not retrospective so would only be applicable from now. I now wonder how to work this, ie what percentage split we should use to get the full £1000 allowance in future when we don't know the exact rent we will get at the start of the year - I think it would make sense to go to something higher - say 10% and for her to pay tax on the extra via SA?

Thanks.

polymaff

AIUI, the Property Allowance is just an alternative way of working out what is to be taxed. If you don't use it you are taxed upon your (fraction of the) gross income less your (fraction of the) expenses. If you do use it then rather than detailing your (fraction of the) expenses you just use a figure which is the lesser of your (fraction of the) gross income and £1,000.

An interesting outcome of this, and the one that has captured media attention, is that nobody with a gross income from property of £1,000 or less who opts for the Property Allowance will ever pay tax on that income - and HMRC have recognised this by declaring that those people won’t have to tell HM Revenue and Customs (HMRC) or declare this income on a tax return.

As you can't use both the old and new approaches simultaneously, you won't benefit from the Property Allowance until you get your expenses below £1,000.

Note that where the property is jointly owned each party has their own Property Allowance. So more co-owners is the way to make the Property Allowance pay off.


Caveat: There's more to your affairs than the Property Allowance - and the above is based upon an HMRC briefing.