Re: Tax on Rental Income

"fj" <> wrote in message
news:Prctg.7749$
> Hi,
>
> We have a jointly owned property - currently rented.
>
> Can my partner take all the rental income and pay all expenses so she is
> the
> only one taxed on this income?
>
> Or is it split down the middle and we both take 50% of the eincome and
> claim
> 50% of the expenses.
>
> The former situation is better as then I will not be pushed up to a higher
> earning taxation level

IIRC it will be split on the basis of the declared ownership
of the property. Of course, the CGT payable when you
eventually sell will be based upon the same.

tim

Tax on Rental Income

Hi,

We have a jointly owned property - currently rented.

Can my partner take all the rental income and pay all expenses so she is the
only one taxed on this income?

Or is it split down the middle and we both take 50% of the eincome and claim
50% of the expenses.

The former situation is better as then I will not be pushed up to a higher
earning taxation level

Cheers

Fred

Re: Tax on Rental Income

tim (back at home) wrote:
> "fj" <> wrote in message
> news:Prctg.7749$
> > Hi,
> >
> > We have a jointly owned property - currently rented.
> >
> > Can my partner take all the rental income and pay all expenses so
> > she is the
> > only one taxed on this income?
> >
> > Or is it split down the middle and we both take 50% of the eincome
> > and claim
> > 50% of the expenses.
> >
> > The former situation is better as then I will not be pushed up to a
> > higher earning taxation level
>
> IIRC it will be split on the basis of the declared ownership
> of the property. Of course, the CGT payable when you
> eventually sell will be based upon the same.
>
> tim

If married you can give your half to your wife with no tax implication then
all the income is hers.

I have never been able to find out conclusively if you have to go through
land registry etc or if you can just give it to her, say with a little note
saying 'it's all yours love so you pay the tax, expenses and do all the work
from now onwards.'

Mark BR

Re: Tax on Rental Income

Mark BR wrote:

> If married you can give your half to your wife with no tax implication

except for Stamp Duty Land Tax possibly

Re: Tax on Rental Income

Mark BR wrote:
> tim (back at home) wrote:
>
>>"fj" <> wrote in message
>>news:Prctg.7749$
>>

>>>We have a jointly owned property - currently rented.
>>>
>>>Can my partner take all the rental income and pay all expenses so
>>>she is the
>>>only one taxed on this income?
>>>
>>>Or is it split down the middle and we both take 50% of the eincome
>>>and claim
>>>50% of the expenses.
>>>
>>>The former situation is better as then I will not be pushed up to a
>>>higher earning taxation level
>>
>>IIRC it will be split on the basis of the declared ownership
>>of the property. Of course, the CGT payable when you
>>eventually sell will be based upon the same.
>>

> If married you can give your half to your wife with no tax implication then
> all the income is hers.

Not so. He might as well argue to the taxman that he could transfer
salary from his paid employment to his wife, in order to split the tax
liability on that. We are talking about transferring income here, not
capital assets.

As the previous poster said, rental income is split according to the
proportions by which you own the property. The good news is that this
can be easily changed (though you have to do it in advance of earning
the rental income (ie, you can't change the proportions on 4 April and
expect to transfer all the income for the whole tax year over to her.

I'm guessing you own your property as "Joint tenants"? (which will be
50:50). You need to change the ownership to "Tenants in Common" which
has to be registered with the Land Registry, and has other legal
ramifications but basically means you can stipulate the relative
ownership; so providing you trust your wife!, you want to make it 99%
hers, 1% yours (1% is the minimum AIUI). Having done that step, it's
easy enough (and legal) to change it back to 50:50 just before you sell
the property, to make optimum use of both of your CGT allowances.

Went through all this myself quite recently.

David


>
> I have never been able to find out conclusively if you have to go through
> land registry etc or if you can just give it to her, say with a little note
> saying 'it's all yours love so you pay the tax, expenses and do all the work
> from now onwards.'
>
> Mark BR
>
>

Re: Tax on Rental Income

Lobster wrote:

> Mark BR wrote:
>>
>> If married you can give your half to your wife with no tax implication
>> then all the income is hers.
>
> Not so. He might as well argue to the taxman that he could transfer
> salary from his paid employment to his wife, in order to split the tax
> liability on that.

That's not the same thing.

> We are talking about transferring income here, not capital assets.

But we are talking about capital assets. Once he transfers it to
his wife or partner, the income then becomes hers.

> As the previous poster said, rental income is split according to the
> proportions by which you own the property. The good news is that this
> can be easily changed (though you have to do it in advance of earning
> the rental income (ie, you can't change the proportions on 4 April and
> expect to transfer all the income for the whole tax year over to her.

You can transfer it retrospectively. Well, you can't really, but as no
official recording of the act need be made in advance, you can notify
the taxman after the fact. E.g. you can notify the taxman in the notes
to your tax return due by 31th Jan 07 that you changed the proportions
on or with effect from 6th April 05.

> I'm guessing you own your property as "Joint tenants"? (which will be
> 50:50). You need to change the ownership to "Tenants in Common" which
> has to be registered with the Land Registry, and has other legal
> ramifications but basically means you can stipulate the relative
> ownership; so providing you trust your wife!, you want to make it 99%
> hers, 1% yours (1% is the minimum AIUI).

I believe it is not necessary to change the paper ownership proportions.
Beneficial interest is what matters and this can be changed by simple
declaration to the taxman.

> Having done that step, it's
> easy enough (and legal) to change it back to 50:50 just before you sell
> the property, to make optimum use of both of your CGT allowances.

Indeed. The trouble is that as the OP is not married to his partner,
all of these transfers would involve CGT implications.

In fact, it might make sense to transfer proportions back and forth
between unmarried partners annually, to make best use of annual CGT
allowances, in order to mitigate the final CGT bill when the property
is sold in due course. This wheeze not available to married co-owners.

Whether married or not, there should be no stamp duty due on these
transfers if they are gifts, even if there is a mortgage involved:
Normally a transfer by gift, in which the donor transfers responsibility
to the donee for the debt, the donee's agreement to take over this
responsibility counts as consideration and hence voids the unfettered
gift status of the transfer and so SD becomes payable on the value of
the debt involved -- but in the case of co-owners who already hold a
joint mortgage with joint and several responsibility, then they are
already *both* liable for the *whole* debt, and hence changing ownership
proportion involves no *transfer* of responsibility for debt.

Re: Tax on Rental Income

Ronald Raygun wrote:

> Indeed. The trouble is that as the OP is not married to his partner,
> all of these transfers would involve CGT implications.
>
> In fact, it might make sense to transfer proportions back and forth
> between unmarried partners annually, to make best use of annual CGT
> allowances, in order to mitigate the final CGT bill when the property
> is sold in due course. This wheeze not available to married co-owners.


Take care also that if they are not married there will be inheritence
tax implications of transferring ownership (i.e. gifting) of the
property. If the giver dies within 7 years the the value of the gift
is included in the IHT calculation. Also, if you get married later that
does not help. it is whether you were married at the time of the gift
that matters for IHT.

In view of this it might be safer to find a solution where the partner
borrow's money to buy out the house perhaps using an IOU, so that it is
not a gift. IANAL.

Robert

Re: Tax on Rental Income

Robert wrote:

> Take care also that if they are not married there will be inheritence
> tax implications of transferring ownership (i.e. gifting) of the
> property. If the giver dies within 7 years the the value of the gift
> is included in the IHT calculation. Also, if you get married later that
> does not help. it is whether you were married at the time of the gift
> that matters for IHT.
>
> In view of this it might be safer to find a solution where the partner
> borrow's money to buy out the house perhaps using an IOU, so that it is
> not a gift.

You can't get around IHT liability that easily.

If instead of A giving (a share of) the house to B, B buys it off A for
a cash sum, then A's estate will still have that cash sum lying around
to be taxed (unless A spends it all first, of course).

If B borrows the money from A first, and then uses it to pay A
for the asset, then when A dies, B will still owe the estate the
money, and it will therefore still be taxed.

Re: Tax on Rental Income

Ronald Raygun wrote:
> Lobster wrote:
>
>>Mark BR wrote:
>>
>>>If married you can give your half to your wife with no tax implication
>>>then all the income is hers.
>>
>>Not so. He might as well argue to the taxman that he could transfer
>>salary from his paid employment to his wife, in order to split the tax
>>liability on that.
>
>
> That's not the same thing.
>
>
>>We are talking about transferring income here, not capital assets.
>
>
> But we are talking about capital assets. Once he transfers it to
> his wife or partner, the income then becomes hers.

OK, misunderstanding - I took the last poster's response to mean that he
could give his half of the rental income to his wife; you reckon he
means gifting her his half of the property - if so, then yes I agree
with you!

>>As the previous poster said, rental income is split according to the
>>proportions by which you own the property. The good news is that this
>>can be easily changed (though you have to do it in advance of earning
>>the rental income (ie, you can't change the proportions on 4 April and
>>expect to transfer all the income for the whole tax year over to her.
>
> You can transfer it retrospectively. Well, you can't really, but as no
> official recording of the act need be made in advance, you can notify
> the taxman after the fact. E.g. you can notify the taxman in the notes
> to your tax return due by 31th Jan 07 that you changed the proportions
> on or with effect from 6th April 05.

Mm. My accountant got very twitchy when I suggested doing this; OK, he
wants to cover himself by advising me to do it by the book, but he
reckoned that the above route was likely to 'look' potentially dodgy and
therefore by more likely to attract the attention of HMIR and
precipitate one of their dreaded spot-checks.

>>I'm guessing you own your property as "Joint tenants"? (which will be
>>50:50). You need to change the ownership to "Tenants in Common" which
>>has to be registered with the Land Registry, and has other legal
>>ramifications but basically means you can stipulate the relative
>>ownership; so providing you trust your wife!, you want to make it 99%
>>hers, 1% yours (1% is the minimum AIUI).
>
> I believe it is not necessary to change the paper ownership proportions.
> Beneficial interest is what matters and this can be changed by simple
> declaration to the taxman.
>
>
>>Having done that step, it's
>>easy enough (and legal) to change it back to 50:50 just before you sell
>>the property, to make optimum use of both of your CGT allowances.
>
> Indeed. The trouble is that as the OP is not married to his partner,
> all of these transfers would involve CGT implications.

Ah, missed the subtle but vital nuance of the word "partner"...

David

Re: Tax on Rental Income

On Fri, 14 Jul 2006 10:06:14 GMT, Ronald Raygun
<> wrote:

>Indeed. The trouble is that as the OP is not married to his partner,
>all of these transfers would involve CGT implications.
>
How do you know they are not married?

--
Peter Saxton from London

Re: Tax on Rental Income

Peter Saxton wrote:

> On Fri, 14 Jul 2006 10:06:14 GMT, Ronald Raygun
> <> wrote:
>
>>Indeed. The trouble is that as the OP is not married to his partner,
>>all of these transfers would involve CGT implications.
>>
> How do you know they are not married?

I don't know it, but the fact that he referred to her as partner
and not as wife does rather suggest it.

Re: Tax on Rental Income

On Sat, 15 Jul 2006 09:16:44 GMT, Ronald Raygun
<> wrote:

>Peter Saxton wrote:
>
>> On Fri, 14 Jul 2006 10:06:14 GMT, Ronald Raygun
>> <> wrote:
>>
>>>Indeed. The trouble is that as the OP is not married to his partner,
>>>all of these transfers would involve CGT implications.
>>>
>> How do you know they are not married?
>
>I don't know it, but the fact that he referred to her as partner
>and not as wife does rather suggest it.

One definition is:

"the person you are married to or living with as if you were married
to them, or the person you are having a sexual relationship with"

Some married people refer to their husband/wife as a partner to show
solidarity with homosexuals and different sex unmarried couples.

--
Peter Saxton from London

Re: Tax on Rental Income

On Sat, 15 Jul 2006 15:11:47 +0100, "fj" <> wrote:

>
>Thanks for that and peter is right we are not married (yet)!
>
>cheers
>
>fj
>
No, Ronald was right in his guess and I was right not to guess!

--
Peter Saxton from London

Re: Tax on Rental Income

Peter Saxton wrote:
> On Sat, 15 Jul 2006 15:11:47 +0100, "fj" <> wrote:
>
>
>>Thanks for that and peter is right we are not married (yet)!
>>
>
> No, Ronald was right in his guess and I was right not to guess!

Hey don't leave me out... I guessed wrong!

David

Re: Tax on Rental Income

Thanks for that and peter is right we are not married (yet)!

cheers

fj

Re: Tax on Rental Income

On Sat, 15 Jul 2006 13:13:30 GMT, Lobster
<> wrote:

>Peter Saxton wrote:
>> On Sat, 15 Jul 2006 15:11:47 +0100, "fj" <> wrote:
>>
>>
>>>Thanks for that and peter is right we are not married (yet)!
>>>
>>
>> No, Ronald was right in his guess and I was right not to guess!
>
>Hey don't leave me out... I guessed wrong!
>
>David

Anyone else want to be considered?

--
Peter Saxton from London

Re: Tax on Rental Income

YES you can divide as you see fit if I understand your circumstances
correctly.

See:






"fj" <> wrote in message
news:Prctg.7749$
> Hi,
>
> We have a jointly owned property - currently rented.
>
> Can my partner take all the rental income and pay all expenses so she is
> the
> only one taxed on this income?
>
> Or is it split down the middle and we both take 50% of the eincome and
> claim
> 50% of the expenses.
>
> The former situation is better as then I will not be pushed up to a higher
> earning taxation level
>
> Cheers
>
> Fred
>
>

Re: Tax on Rental Income

Hmm, most interesting...To quote from the HMRC website (paraphrased):

"Husbands and wives living together should generally be treated as
entitled in equal shares to income from jointly held property...[except
where]...both husband and wife have signed a declaration under
ICTA88/S282B stating their beneficial interests in both the property
and the income arising from it...[AND]...their interests in the income
and in the property itself correspond."

As we're about to jointly invest in a BTL flat, and she is a basic rate
taxpayer while I'm at higher rate, I take it that we can legally
arrange our affairs so as to minimise our overall tax bill by making a
declaration along the lines of "Mr F has an interest of x% in the
property and Mrs F has an interest of y% in the property", so long as
we ensure that x% of the rental income goes to me and y% to her ?

Comment from a tax-knowledgeable person would be very welcome.

Nick

Re: Tax on Rental Income

wrote:
> Hmm, most interesting...To quote from the HMRC website (paraphrased):
>
> "Husbands and wives living together should generally be treated as
> entitled in equal shares to income from jointly held
> property...[except where]...both husband and wife have signed a
> declaration under ICTA88/S282B stating their beneficial interests in
> both the property and the income arising from it...[AND]...their
> interests in the income and in the property itself correspond."
>
> As we're about to jointly invest in a BTL flat, and she is a basic
> rate taxpayer while I'm at higher rate, I take it that we can legally
> arrange our affairs so as to minimise our overall tax bill by making a
> declaration along the lines of "Mr F has an interest of x% in the
> property and Mrs F has an interest of y% in the property", so long as
> we ensure that x% of the rental income goes to me and y% to her ?
>
> Comment from a tax-knowledgeable person would be very welcome.

Firstly you are always entitled to organise your affairs so as to minimise
your overall tax bill (making the assumsion it is a legal organisation!)

I believe you can than make that statement. We have over a period of about
12 years on a property that was initially 100% mine, it is now 100% my
wife's and the income has correspondingly change from one tax form to the
other. No complaints yet.

Mark BR