Reducing tax

GrizzlyAdams_2

I have rental income in addition to some other self-employed income. The rental income is pushing my tax bill up very high.

I would like to make use of my wife's tax allowance. So, do I need to put the property in her name/ joint names or can I leave as is and just declare the income under her self-assessment ?

Murdina

you need to make a gift to her of part of the property. You can do this by changing the entry on the land register, or by going to a solicitor and drawing up some paperwork which may give her beneficial ownership, but leaves just your name on the title deeds.

Once you have done this, then she becomes liable to pay tax on her share of the rental income. There is a slight quirk to this. Once you own an asset jointly, you are deemed to receive the income from it in EQUAL shares unless you specifically elect to be taxed by reference to your ACTUAL ownership.

So you could arrange to give your wife 5% of the property (make sure you have a solicitor to help you though) but she gets taxed on half the income.

Don't forget whatever you give her is then of course hers to do with as she wishes and that when it comes to sale, she will also have CGT to pay.

GrizzlyAdams_2

Hi, thanks for the reply. I was just reading another thread (which didn't show up when I searched originally) and it seems the tax savings may well be negligible compared to possible future CGT. I understand that transferring whilst the property is let would make the wife's share liable for CGT.

silvercar

Transfers between spouses are exempt. Your wife is deemed to have aquired the property at the time and for the price you paid. The only differences are quirky ones. If you lived in the property for a time and she hadn't, you would have PPR exemption on her half and she wouldn't. Also if you bought the property before (I think) 1998, she would benefit by indexation relief on the transfer value.

Im not sure that you can use tax allowances against rental income, isn't it all counted as unearned income and taxed at marginal rate?

GrizzlyAdams_2

silvercar wrote: »

Transfers between spouses are exempt. Your wife is deemed to have aquired the property at the time and for the price you paid. The only differences are quirky ones. If you lived in the property for a time and she hadn't, you would have PPR exemption on her half and she wouldn't. Also if you bought the property before (I think) 1998, she would benefit by indexation relief on the transfer value.

Im not sure that you can use tax allowances against rental income, isn't it all counted as unearned income and taxed at marginal rate?

Are you sure about not being able to use tax allowance against rental income? Isn't it counted as self-employed income?

jamesd

The personal allowance applies.