deed of trust query

[yoda999]

Hi I am sole owner of properties and have mortgages in my sole name. I have no other income and my wife has no income.

We wish to share income 50/50. Is it correct that we can use a deed of trust and deed of gift where I can gift 1% share in properties to my wife. By doing so and in the absence of form 17 we can split the income 50/50?

As 1% is less than £40K no stamp duty payable (this was done before stamp duty holiday).

Does this all seem correct?

Thanks.

[maths]

No.

In order for rental income to be split between husband and wife 50/50 but with wife owning only a 1% beneficial interest in the property requires that the legal title to the property is held by both husband and wife, not just husband.

[yoda999]

Hi there seems to be many different views on this topic.

Hi I also came across this article:
https://www.taxationweb.co.uk/tax-articles/property-taxation/the-principles-and-implications-of-joint-tenancy-and-tenancy-in-common-for-spouses.html

Relevant section is:
it may be that the automatic assumption of equal split of income between spouses can in fact be used as part of tax planning. For example, the husband purchases a buy to let in his sole name. As a 40% taxpayer he is exposed to this rate of tax on the rental income. His wife has no income. The husband, however, may not wish to transfer any significant part of the real estate to his wife but would like to reduce his income tax liability on the rental income.

The husband could therefore enter into a declaration of trust under which he transfers a 1% beneficial interest in the property to his wife; he thus retains 99% beneficially of the property. No declaration is made i.e., no Form 17 is lodged with HMRC. As a consequence, under the above rule, each spouse will now be subject to income tax on 50% of the rental income. The husband will have effectively reduced his income tax liability on the rental income (as 50% is allocated to his wife) whilst he still retains the bulk (99%) of the property.

[maths]

Haven't read the whole article but the quote is mislieading/incorrect.

Th start point is the legislation. This provides that where the legal title is in joint names of the spouses any rental income is automatically split 50/50.

However, a declaration can be made under which the rental income is to be split not 50/50 but split inline with the respective beneficial interests (Form 17 filing).
So the legal title which is held by both spouses is declared by them to be held in trust as beneficial tenants in common, say, 70/30%' 80/10, 99/1 or even 100/0%. Then, a declaration to HMRC (Ie filing of Form 17) is made and the automatic 50/50 divide no longer applies being replaced by 70/30 etc.

Where legal title is held in the name of one spouse only the automatic 50/50 split rule does not apply; the rental income is split in line with the respective beneficial interests eg 70/30 etc.

[yoda999]

Hi will a deed of gift transferring 1% result in legal title being in both spouses names? In which case 50/50 split will be applicable?

[maths]

Yes. The relevant forms need to then be lodged with Land Registry so the legal title can be updated showing both names as joint legal owners.

Any rental income (absent lodging Form 17) is then automatically split 50/50.