tax on rent income

by **ednmra** on Mon Sep 21, 2009 8:12 am

Hi
New user here. Seems a very useful site.
My question is that I wish to transfer full ownership of a small property to my wife so that the a chunk of the rent income uses up her tax free allowance. She is 66, her current income is her pension only, about £80 per week, so it seems that about £5500 or so of rent would be untaxed, and the rest taxed only at basic rate whereas I pay tax on full amount, and at 40%. The rented house is currently in my name only.

Do I need a special form, witnesses and/or anything else to effect the transfer, and do I lodge such details with my tax office, or local government, or anyone else?

There is currently no question of selling the property, or our own house, and no loans on either. (We are joint owners of the house we live in.)

Regards
Martin

by **tom 7000** on Mon Sep 21, 2009 8:57 am

You have to go see a solicitor and make a full conveyance over to her. There may or may not be stamp duty depending if there is a mortagage on it.

While you are there get him to do you a will at the same time, its important you have one.

There is no tax as transfers of assets between husbands and wives are free of tax.

Alternatively, you could give it to the kids if you are thinking about inheritance tax planning...but you'll need to see an accountant to make the gift relief claims.

tom

by **ednmra** on Mon Sep 21, 2009 9:54 am

Thanks - I assumed it would need something like that. For the moment we are mainly concerned that the income from the house be seen to be hers. I am assuming she needs to own it for that purpose!

So far as a will is concerned, our existing wills both leave our estates fully to each other. so in the event I survived my wife the house would return to me anyway. Later on we probably will arrange some form of inheritance tax tactic though not so urgent now that we have the joint allowance of something over £600K isn't it?

by **Peter D** on Mon Sep 21, 2009 10:30 am

Nor so fast. There are some important questions un-answered here. Did you ever live in the property, if so for how many years and how many years have you owned it. Doing a transfer can loose you PPR and Letting Relief. It may also pay you to retain a 1% ownership in the property so you would have two sts of CG allowance should you sell the property. IHT planning is so easy to put off until tomorrow but should be addressed when such changes are taking place. Regards Peter

by **ednmra** on Mon Sep 21, 2009 1:49 pm

I've never lived there. It was my dental practice till retirement. I have owned the building since late 1982. It became available to let in Jan 2003.
Would retaining 1% affect the tax situation? Or would I have to state I take 1% of the rent !!?

Not sure what you mean by letting relief or PPR

by **Peter D** on Mon Sep 21, 2009 2:10 pm

OK PPR and letting relief will not apply, however it would appear that this was a commercial property from where you conducted your business, is this still a commercial let or is it now a residential let. Regards Peter

by **ednmra** on Mon Sep 21, 2009 4:54 pm

It is a small terraced house that was my practice on ground floor and a 1 bed flat that I rented out on top floor.
When I retired an incoming dentist rented it, turned most of it into a practice but had to keep one upper main room "domestic" due to council restrictions. It was like that from early 2003 to 2008, then they moved on. I converted it back to full domestic shorthold tenancy (the whole house as one unit, not in flats).
Did all the hoops and hurdles to satisfy council planners, energy efficiency etc. Everything they wanted.
So that is how things rest now. Freehold market value about £190,000 at present.

by **Peter D** on Mon Sep 21, 2009 9:35 pm

OK I understand. I ask the questions due to any business relief but it does not appear to apply as you have done the conversion. As your spouse owns no share of the house and has not lived there then a full conveyance, as previuosly detailed, is required. This is an interspousal transfer done on a no gain, no loss basis so no tax implications as such. Before you sell the property sometime in the future you could add your self back in as an oenr to double your CG allowance presently £10,100 each. Regards Peter