Properrty Transfer to wife - tax impact

[drdes]

I own a property in my sole name and thinking of transferring part of it to my wife.

Property is currently has a £240k mortgage on it. Plan is to transfer c.16% of the property to my wife via a DoT (top keep the transfer below £40k and hence no stamp duty). No changes to land registry, mortgage provider (although I will check the T&Cs) or need to inform HMRC (I think!). Once this is done, all income will be taxed 50:50 and we would be happy with that (so no need for a form 17).

First question - is the process as simple as this to get to a position where the income is taxed 50:50 (my wife is on a lower tax band than me).

The second part is the tax treatment upon any future disposal.

The history of property is as follows:

Property purchased by me in 2000 and I lived in it alone until June 2005.
From July 2005 to December 2005 I lived there with my wife.
From December 2005 until now it has been let out and will continue to be let out in the future.
Intention would be to transfer a portion to my wife (As above) in October 2016.

Questions:
1. Would my wife benefit from PPR upon sale? I think the answer is No because at time of transfer she did not live there (and we have no intention to do so in the future).
2. How would it impact Lettings relief? Would my £40k be affected - would this be prorated in any way or is the £40k per property?
3. Would my wife get any letting relief?
4. If I transferred (say) 16% of the property and did not fill in any Form 17 and was happy to split income/profit 50:50, would CGT also be split 50:50? Or would it be split 84:16?

The issue I have is that the property has a large Capital Gain so want to make sure the savings I make on Income tax aren't given away on CGT if I sell the property.

Thanks

[maths]

First question - is the process as simple as this to get to a position where the income is taxed 50:50 (my wife is on a lower tax band than me).

No. You appear to own the legal title in your name only. A transfer of circa 16% of the beneficial interest entitles wife to only 16% of rents. The 50/50 automatic split only applies where legal title held jointly.

1. Would my wife benefit from PPR upon sale? I think the answer is No because at time of transfer she did not live there (and we have no intention to do so in the future).

Correct; no PPR.

2. How would it impact Lettings relief? Would my £40k be affected - would this be prorated in any way or is the £40k per property?

You would get lettings relief in full.

3. Would my wife get any letting relief?

No.

4. If I transferred (say) 16% of the property and did not fill in any Form 17 and was happy to split income/profit 50:50, would CGT also be split 50:50? Or would it be split 84:16?

See my comments above.