Buy to Let Tax - Assign income to wife for property not in her name

[npjacques]

Hi all,

I currently have a single property that I let out and is in just my name however due to a recent promotion I am now paying high rate tax on the property income.

As my wife is a lower rate tax payer we would like to utilise her lower tax rate so would like some advice as to how I achieve this. I've spoken to a couple of solicitors and done some research online but am getting mixed messages, the options as I understand them are...

- Use a deed of assignment
- Use a declaration of trust

In each scenario we would like to assign 99% of the property income to my wife.

I've been told by one solicitor that using a declaration of assignment is the easiest and cheapest however having spoken to the mortgage provider they are saying that they will not allow me to do this. Going back to the solicitor they have said that the mortgage provider does not need to provide permission as it has no effect on the mortgage therefore I should proceed. This has been backed up by another solicitor that I have spoken to.

I've been told by another solicitor that deed of trust is the right way to go however I do not know much else about this approach and how it's different from a declaration of assignment?

For context, stamp duty is not a concern as the outstanding mortgage is only £30k.

Any advice would be much appreciated!

Thanks in advance,
Neil.

[AGoodman]

Doing this by any route needs to involve transferring 99% of the beneficial interest in the property to your wife. i.e. for most purposes she is the owner of 99% of the property. You stay as the registered (legal) owner.

I'm not sure how a deed of assignment would be formulated but I don't think it is sufficient to assign her a right to income alone, I think you need to be transferring her a share of the property.

Whether you need mortgagee approval depends on the terms of your mortgage and how the restriction on transfers is drafted. I suspect many people make declarations of trust where they shouldn't - on the basis the lender will not find out. You do need to make sure you don't commit fraud when re-mortgaging by claiming that you are still the 100% beneficial owner.

Subject to the mortgage point, I would always use a declaration of trust. It can be a one page document. You then need to file form 17 otherwise you are taxed on the income 50/50 irrespective of actual shares.