BTL income to wife

[n428]

After a bit of advice.. Recent promotion at work has just put me into the 40% tax bracket on PAYE.

I have approximately £950/ month of BTL income on top - this property (along with our main residence) are mortgaged in my name. Recently married - she is basic rate tax payer. Despite house & mortgage being in my name, can I some how (legally) reduce by tax burden via her?

Thanks

[nickfrog]

I don't think so but perhaps if cashflow allows and if you are not bothered about having money you can't touch until you're 55 (depending on your current age) you could dedicate large enough amounts to your pension so that it covers any income over the higher tax threshold through tax relief.
Unless of course Sunak caps tax relief at the lower threshold in a couple of weeks...

[OutInTheShed]

n428 said:

After a bit of advice.. Recent promotion at work has just put me into the 40% tax bracket on PAYE.

I have approximately £950/ month of BTL income on top - this property (along with our main residence) are mortgaged in my name. Recently married - she is basic rate tax payer. Despite house & mortgage being in my name, can I some how (legally) reduce by tax burden via her?

Thanks

It certainly used to be possible.
Transfer half the property to her name. Share the rent.
Helps with CGT when you sell.
There will be stamp duty to pay I think.
And presumably you'd need to change the mortgage
I assume you can't give away a big slice of something mortgaged in your sole name....

There's also Form 17 which I don't properly understand!
https://www.parachutelaw.co.uk/news/property/hmrc-...

[Jayyy]

My understanding is that you can alter the beneficial ownership (via a Declaration of Trust) and therefore the resultant income/taxation split without making any changes to the legal ownership.

This position appears to be confirmed towards the bottom of the thread below;

https://community.hmrc.gov.uk/customerforums/ifp/c...

As its not held jointly as Tenants in Common I don't think Form 17 is applicable but obviously stand to be corrected.

[TwigtheWonderkid]

I'm no accountant or lawyer, but even if you own the property, can't she manage it all for you as you're so busy as a high earner, and liaise with the tenants, a service for which she takes a 99% cut of the rent, passing 1% to you?

[Kwackersaki]

Jayyy said:

My understanding is that you can alter the beneficial ownership (via a Declaration of Trust) and therefore the resultant income/taxation split without making any changes to the legal ownership.

This position appears to be confirmed towards the bottom of the thread below;

https://community.hmrc.gov.uk/customerforums/ifp/c...

As its not held jointly as Tenants in Common I don't think Form 17 is applicable but obviously stand to be corrected.

We did exactly this. Our solicitor insisted we update the deeds with the land registry but I don’t think that’s a requirement.

More info here - https://www.property-tax-portal.co.uk/can-i-gift-m...

[Eric Mc]

Yes - it is possible to transfer beneficial ownership of the property to a spouse. It can be any percentage from 1 to 100%. Therefore, the rental income would be split between the couple in the proporation of the ownership.

If, at a future date, the property is sold, then the Capital Gain and the Capital Gains Tax arising will be split in the same proportion (and it also means that TWO Capital Gains Tax allowances - currently £12,300 per person - will be available to offset against the overall gain).

BUT, my advice is always, before making a decision which is being pushed by a desire to save tax, be aware of all the other implications of such a decision outside of the world of tax. Don't let the tax tail wave the life dog.

[SturdyHSV]

Eric Mc said:

Yes - it is possible to transfer beneficial ownership of the property to a spouse. It can be any percentage from 1 to 100%. Therefore, the rental income would be split between the couple in the proporation of the ownership.

I assume it has to be a spouse, in terms of legally married and not just co-habiting etc.?

[Kwackersaki]

SturdyHSV said:

Eric Mc said:

Yes - it is possible to transfer beneficial ownership of the property to a spouse. It can be any percentage from 1 to 100%. Therefore, the rental income would be split between the couple in the proporation of the ownership.

I assume it has to be a spouse, in terms of legally married and not just co-habiting etc.?

We were only engaged at the time.

[Sarnie]

Beware when needing to remortgage, lots of lenders will not be accepting of the rent being received by somebody not named on the mortgage......

[Eric Mc]

SturdyHSV said:

Eric Mc said:

Yes - it is possible to transfer beneficial ownership of the property to a spouse. It can be any percentage from 1 to 100%. Therefore, the rental income would be split between the couple in the proporation of the ownership.

I assume it has to be a spouse, in terms of legally married and not just co-habiting etc.?

Has to be a spouse or in a civil partnership.

[Consigliere]

n428 said:

After a bit of advice.. Recent promotion at work has just put me into the 40% tax bracket on PAYE.

I have approximately £950/ month of BTL income on top - this property (along with our main residence) are mortgaged in my name. Recently married - she is basic rate tax payer. Despite house & mortgage being in my name, can I some how (legally) reduce by tax burden via her?

Thanks

I believe as the property and the mortgage is in your name only, you can set up something called a Declaration of Trust which shows the split (so even though you own the property as per the title deeds and are on the hook for the mortgage you can be 0% and she can be 100%).

I don't know if a Declaration of Trust can be a DIY job or you need a solicitor?

I'm not an expert.

[adamfawsitt]

TwigtheWonderkid said:

I'm no accountant or lawyer, but even if you own the property, can't she manage it all for you as you're so busy as a high earner, and liaise with the tenants, a service for which she takes a 99% cut of the rent, passing 1% to you?

I would advise not to make a mountain out of a molehill - your new wife can be your agent managing the rental for you and take maybe 70% as her fee (99% might be a little sporty but I love the approach!).

[Eric Mc]

Does the wife have a salary/income of her own?

Would awarding her a large portion of the rental profits as a "property management" fee cause her tax problems?

She will, for a start, have to sign up for self assessment if she hasn't done so already.

[Consigliere]

n428 said:

After a bit of advice.. Recent promotion at work has just put me into the 40% tax bracket on PAYE.

I have approximately £950/ month of BTL income on top - this property (along with our main residence) are mortgaged in my name. Recently married - she is basic rate tax payer. Despite house & mortgage being in my name, can I some how (legally) reduce by tax burden via her?

Thanks

What did you do in the end?

[UrbanAchiever]

Eric Mc said:

Yes - it is possible to transfer beneficial ownership of the property to a spouse. It can be any percentage from 1 to 100%. Therefore, the rental income would be split between the couple in the proporation of the ownership.

If, at a future date, the property is sold, then the Capital Gain and the Capital Gains Tax arising will be split in the same proportion (and it also means that TWO Capital Gains Tax allowances - currently £12,300 per person - will be available to offset against the overall gain).

BUT, my advice is always, before making a decision which is being pushed by a desire to save tax, be aware of all the other implications of such a decision outside of the world of tax. Don't let the tax tail wave the life dog.

Presumably, switching beneficial ownership back to a different % when time comes to sell, to minimise Capital Gains Tax would not be permitted?

[Eric Mc]

How would it minimise Capital Gains Tax?

[Armitage.Shanks]

Out of interest where does one get/draw up a Deed of Trust to transfer all income to a spouse where they are not an onwer joint or otherwise on a rental property?

[UrbanAchiever]

Eric Mc said:

How would it minimise Capital Gains Tax?

If the 45% income tax payer stops work before they can access their pension so not a tax payer. And the 20% tax payer continues to work. The property is sold after the 45% tax payer stops work.

This is likely to be my situation in a few years.

[Consigliere]

Armitage.Shanks said:

Out of interest where does one get/draw up a Deed of Trust to transfer all income to a spouse where they are not an onwer joint or otherwise on a rental property?

A conveyancer is your best bet, although I believe you can DIY it if you so wish (i am no expert though)