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Where Taxpayers and Advisers Meet

Husband owns rental property. Can wife be taxed for rental income?

MacLondon
Posts:3
Joined:Sun Jan 29, 2017 9:36 pm
Husband owns rental property. Can wife be taxed for rental income?

Postby MacLondon » Sun Jan 29, 2017 9:47 pm

I am the sole legal owner of a rental property. I am a higher rate tax payer. My wife has very minimal income as self employed. Our residential property is separate, and I am also the sole legal owner of this property.

To minimise tax, I wish to make my wife the beneficial owner (while retaining legal title) of the renal property so that she is taxed on the rental income.

According to this site (http://www.deedoftrust.co.uk/index.php/ ... c-guidance) I can create an "Express Trust" (bare trust) in writing but do not have to submit it to anyone nor does it have to be witnessed.

All that remains then is for my wife to complete her Self Assessment declaring the rental income.

Is this all that is required by HMRC or do I have to do anything else? Are there better alternatives for becoming tax efficient?

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Husband owns rental property. Can wife be taxed for rental income?

Postby section 44 » Mon Jan 30, 2017 2:16 pm

Generally tax is not concerned with legal ownership, income becomes to the beneficial owner(s) and it is they that are taxed on it.

MacLondon
Posts:3
Joined:Sun Jan 29, 2017 9:36 pm

Re: Husband owns rental property. Can wife be taxed for rental income?

Postby MacLondon » Tue Jan 31, 2017 1:21 pm

Thank you. So I'm essentially asking ... what is the correct way to designate my wife as beneficial owner that is acceptable to HMRC.

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Husband owns rental property. Can wife be taxed for rental income?

Postby section 44 » Tue Jan 31, 2017 5:14 pm

In writing, declare a trust of the property for the benefit of your wife

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

Re: Husband owns rental property. Can wife be taxed for rental income?

Postby maths » Tue Jan 31, 2017 8:24 pm

If the property is mortgaged be wary of precipitating an SDLT charge on the acquisition by the wife of the beneficial interest.

Ian McTernan CTA
Posts:1232
Joined:Wed Aug 06, 2008 3:02 pm
Location:Bedford
Contact:

Re: Husband owns rental property. Can wife be taxed for rental income?

Postby Ian McTernan CTA » Wed Feb 01, 2017 2:28 pm

If the property is mortgaged make sure the wife then pays the mortgage and that the payment qualifies as a deduction against the rental income.

You might also want to look at how the property was funded and whether you have a mortgage on your own property, and whether there is scope to move mortgages around so that the rental property has less capital funds tied up in it and more of your total borrowing.
McTernan Associates Ltd
Chartered Tax Advisers
Bedford
Email through link on website:
http://www.imcternan.com

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Husband owns rental property. Can wife be taxed for rental income?

Postby section 44 » Wed Feb 01, 2017 2:56 pm

that the payment qualifies as a deduction against the rental income
How does he do that?

MacLondon
Posts:3
Joined:Sun Jan 29, 2017 9:36 pm

Re: Husband owns rental property. Can wife be taxed for rental income?

Postby MacLondon » Wed Feb 01, 2017 6:05 pm

For clarification, the rental property is not mortgaged.

In declaring a written trust, would it be sufficient to have a bare Express Trust? Would HMRC accept this as evidence of beneficial ownership? Or ... do I need to actually have a deed in place through some lawyers?

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Husband owns rental property. Can wife be taxed for rental income?

Postby section 44 » Wed Feb 01, 2017 6:53 pm

In declaring a written trust, would it be sufficient to have a bare Express Trust?
Yes
Would HMRC accept this as evidence of beneficial ownership?
Yes
do I need to actually have a deed in place
The written declaration of trust would need to be executed as a deed.
through some lawyers?
There's no requirement for this to be done by a lawyer. You might prefer to do so if, for example, you don't consider that you understand what to do or if you like to spread any risk associated with it being done incorrectly


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