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Where Taxpayers and Advisers Meet

Offsetting rental income against personal allowance

rob1984xx
Posts:1
Joined:Sun Jun 25, 2017 3:42 pm
Offsetting rental income against personal allowance

Postby rob1984xx » Sun Jun 25, 2017 4:01 pm

Hello,

1. I am married.
2. My wife is the sole owner of her former home. The property is mortgaged, and is rented out. PROPERTY ONE.
3. I am the sole owner of a flat. The property is mortgaged, and is rented out. PROPERTY TWO.
4. We are joint owners (declaration of trust as Tenants in Common in ratio 65% (to me), 35% (to her) of our home. We currently live here however will rent it out from Aug 18 onwards. The property is mortgaged. PROPERTY THREE.

We both currently work in the UK. We are both Higher Rate tax payers.
My wife will become a non UK earner from Aug 18 onwards

Desire - to fully utilise my wife's tax free allowance to reduce the tax bill for rental income from the three properties.

Question
1. I understand that in order to offset rental income from my flat (PROPERTY TWO) I will need to give my wife a Declaration of Trust - Beneficial Interest.
Question - is the amount of income that can be assigned to her directly proportionate to the percentage interest that I give her? For example: Rental income of £1000 per year. Wife has 50% interest in the property. Can only £500 be offset against her allowance?

2. If I want to be sure of using all of her allowance would I need to transfer 100% of the ownership to her (for both my rental property (PROPERTY TWO) and our home (PROPERTY THREE)?

3. Is there a clause that allows my income to become her income (due to us being married), and therefore a DoT is not needed?

Thank you for your help.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Offsetting rental income against personal allowance

Postby maths » Sun Jun 25, 2017 10:51 pm

1. I understand that in order to offset rental income from my flat (PROPERTY TWO) I will need to give my wife a Declaration of Trust - Beneficial Interest.
Question - is the amount of income that can be assigned to her directly proportionate to the percentage interest that I give her? For example: Rental income of £1000 per year. Wife has 50% interest in the property. Can only £500 be offset against her allowance?
You need to transfer a beneficial interest to her. Yes, rental income needs to be same % as her beneficial interest.
2. If I want to be sure of using all of her allowance would I need to transfer 100% of the ownership to her (for both my rental property (PROPERTY TWO) and our home (PROPERTY THREE)?
Depends upon the figures.


3. Is there a clause that allows my income to become her income (due to us being married), and therefore a DoT is not needed?
No.


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