Income Tax From Property in Joint Names

[Geoff]

As a novice property investor, I am considering buying property to let in joint names with my wife. If I take no income myself can my wife put all profits against her own income tax bill?
All advice received with thanks.

[Sam]

No this isn't possible if the flat it jointly owned. Each person (married or not)has a 50:50 share and therefore rental income is also split 50:50 for UK tax purposes.

[Tax Accountant]

As a novice property investor, I am considering buying property to let in joint names with my wife. If I take no income myself can my wife put all profits against her own income tax bill?
All advice received with thanks.

If the property is owned in shares other than 50:50, there is an Inland Revenue Form which you can complete and send to your tax office. On this basis, you are then able to share the rental income and expenses in the proportion in which the beneficial interest is held by each of you.

Therefore, you could own the property in joint names but advise your solicitors to prepare a Trust Deed to specify the actual shares in which the property is beneficially owned by each one of you. The Trust Deed could easily be altered to reflect a new proportion if the circumstances have changed at a later date, eg, if you owned say 1% originally and then your wife decided that she wanted to transfer 49% to you after 5 years because of her love and affection for you. (I suppose you would allow her to own 99% in the first place because of your love and affection for her!). If you do this, consider the consequences if her love for you wasn't strong enough and therefore she decided to divorce you before she had transferred the 49% to you.

Ramnik

[Geoff]

Thanks folks for your replies. Much appreciated.

Geoff

[Tax Accountant]

Thanks folks for your replies. Much appreciated.

Geoff
You are welcome.
Consider paying for it forward by doing a good deed for someone else when you have no obligation to do so.

Ramnik

[JDO]

The form mentioned is 'Form 17' and can be downloaded from the HMRC website.

My wife and myself own properties this way and the previous postings are correct when they advise you to use a solicitor to draw up the necessary paperwork.

A completed form 17 must be accompanied by documentary evidence (ie solicitors letter or solicitors invoice for work carried out) otherwise the IR will regard your rental income as a 50:50 split.

Also remeber when you come to sell your investment property that your respective CGT liability will be the % of the property that was detailed on your form 17 (ie wife 95% husband 5%)

Hope this helps

Regards

John

[Tax Accountant]

Quote: A completed form 17 must be accompanied by documentary evidence (ie solicitors letter or solicitors invoice for work carried out) otherwise the IR will regard your rental income as a 50:50 split.

Comments: I think correct position is that there is no need to send in the solicitor's invoice etc with the form (although this may be helpful).

Also, the 50:50 split is not dependent on the solicitor's invoice etc but is automatic in the absence of the Form 17.

Quote: Also remeber when you come to sell your investment property that your respective CGT liability will be the % of the property that was detailed on your form 17 (ie wife 95% husband 5%)

Comments: These splits are based on the position as stated in the Trust Deeds. As mentioned in the previous reply, this split is easily capable of being changed at a later date by having a revised Trust Deed in place.

In theory it is possible to have the split 99:1 in favour of the spouse with lower income and then to have it changed to 50:50 prior to a sale to maximise the annual exemptions and other CGT reliefs of both spouses. However, revisions to splits too frequently is not advisable and should always reflect the legal position.

Ramnik

[SJB]

Have been reading this thread with interest, as all the info thus far applies to me too. Could I request a little further info, in that, whilst content for wife and I to have 50:50 share (BTL mortgage on property we are about to complete on is in joint names), what is the best way forward in terms of putting other arrangements in place (specifically, who's name is it best to have the letting agents services/insurance etc in) to enable us to minimise the tax we will have to pay at the end of the year?

As the rental income will be 50:50, is it just a simple case of splitting letting agents fees etc in half and using each half to offset our income?

I am high rate tax payer, wife is currently a non payer (full time mum!) but some advance help for completing tax return when it comes would be gratefully received.

Many thanks

[brookslrj]

Hello. I am also looking for some guidance on this. I have a number of properties which have all been purchased in my own single name (both from a deeds perpective and mortgage point of view). Can I still use this 'Deed of Trust' to move some of the income to my wife who is a zero tax payer (full time Mum also!) even though she doesn't appear on either the deeds or the mortgage paperwork? Thanks.

[Worldlife]

On the question of income my tax office for the last eight years have accepted a Land and Property tax return BS 12 with page 2 completed as follows:-
(you have to insert your notes in any free spaces on the form!)

Heading:- "This page relates to [insert address]"

Next to boxes 5.24 to 5.29 "This property is jointly owned by "A" , "B" and their daughter "C"

Between boxes 5.34

A "A" of [insert address] is the person nominated to keep records of the income from this property"
B The icnome and expenditure are shared equally between "A" and "B". "C" is NOT involved.

You are required to "Tick box 5.46 if these Pages include details of property let jointly" - I have ticked this and put a note alongside "See Notes A and B above.

"A" and "B" each send in a mirror form with half the income and expenditure shown and "C" is sent a copy for her tax information.

The tax office gave us a loss in the first year and have accepted taxable profits on subsequent years. This year we expect to show a loss again

[Tax Accountant]

On the question of income my tax office for the last eight years have accepted a Land and Property tax return BS 12 with page 2 completed as follows:-
(you have to insert your notes in any free spaces on the form!)

Heading:- "This page relates to [insert address]"

Next to boxes 5.24 to 5.29 "This property is jointly owned by "A" , "B" and their daughter "C"

Between boxes 5.34

A "A" of [insert address] is the person nominated to keep records of the income from this property"
B The icnome and expenditure are shared equally between "A" and "B". "C" is NOT involved.

You are required to "Tick box 5.46 if these Pages include details of property let jointly" - I have ticked this and put a note alongside "See Notes A and B above.

"A" and "B" each send in a mirror form with half the income and expenditure shown and "C" is sent a copy for her tax information.

The tax office gave us a loss in the first year and have accepted taxable profits on subsequent years. This year we expect to show a loss again

Just some observations:

(1) You refer to a 'Land and Property tax return BS 12' This is actually the normal self-assessment tax return SA100. The page 2 you refer to is actually the 'Land and Property' supplementary page L2.

(2) If you wish to provide additional information, you should ideally do this in the 'Additional information' box 23.7 on page 10 of the main tax return.

(3) You say that:
"This property is jointly owned by "A" , "B" and their daughter "C".
But you then go on to contradict yourself by saying ''The icnome and
expenditure are shared equally between "A" and "B". "C" is NOT involved.''

Why is the daughter not sharing in the rent?

Ramnik

[Tax Accountant]

Hello. I am also looking for some guidance on this. I have a number of properties which have all been purchased in my own single name (both from a deeds perpective and mortgage point of view). Can I still use this 'Deed of Trust' to move some of the income to my wife who is a zero tax payer (full time Mum also!) even though she doesn't appear on either the deeds or the mortgage paperwork? Thanks.

I strongly believe you can.

But you should seek advice from your own solicitor. Don't let them fob you off by saying that they do not know this because this is relating to tax matters. A Trust Deed is a legal document and as such they should be able to tell you precisely the legal implications and effect of this.

Ramnik

[Tax Accountant]

Have been reading this thread with interest, as all the info thus far applies to me too. Could I request a little further info, in that, whilst content for wife and I to have 50:50 share (BTL mortgage on property we are about to complete on is in joint names), what is the best way forward in terms of putting other arrangements in place (specifically, who's name is it best to have the letting agents services/insurance etc in) to enable us to minimise the tax we will have to pay at the end of the year?

As the rental income will be 50:50, is it just a simple case of splitting letting agents fees etc in half and using each half to offset our income?

I am high rate tax payer, wife is currently a non payer (full time mum!) but some advance help for completing tax return when it comes would be gratefully received.

Many thanks

You say ''As the rental income will be 50:50, is it just a simple case of splitting letting agents fees etc in half and using each half to offset our income?''

You need to prepare the rental income and expenses account for the whole property altogether. Then split each item of income and expense by the number of joint owners and declare the share of each item in the supplementary Land and Property pages of tax return of each of the joint-owners. Eg, if it is shared by two persons, all items are divided by two and each person's tax return will include half of all items of income and expenses relating to the let property. As an additional measure, you could make use of the additional information box 23.7 on page 10 of the tax return to confirm the address(es) of the let properties and also attach the Trust Deeds to evidence that the property and mortgage is held in only your sole name but is beneficially held for both of you and that the income and expenses are split in the proportion specified in the Trust deed.

Also remember that only one supplementary Land and Property page needs to be completed for each taxpayer regardless of the number of let properties. All income and expenses (or shares of income and expenses) of each property is added together and reported in the Land and Property pages as if there is only one composite property. It is advisable to use the additional information box and to attach schedule showing the full details of the let properties, how they are owned jointly and how the declared figures are arrived at.

Ramnik

[Worldlife]

Thanks for you input here Karongo - I've put my notes in red against you various queries.


Just some observations:

(1) You refer to a 'Land and Property tax return BS 12' This is actually the normal self-assessment tax return SA100. The page 2 you refer to is actually the 'Land and Property' supplementary page L2.

Agreed that is form - noted there is an additional reference SA 105 printed vertically along the lower left hand edge

(2) If you wish to provide additional information, you should ideally do this in the 'Additional information' box 23.7 on page 10 of the main tax return.

Noted but I don't want to send other people copies of my main tax return and the Tax Office seem happy with this return

(3) You say that:
"This property is jointly owned by "A" , "B" and their daughter "C".
But you then go on to contradict yourself by saying ''The icnome and
expenditure are shared equally between "A" and "B". "C" is NOT involved.''

No contradiction - the property can be jointly owned with an agreement to share the the net profit or loss from renting it

Why is the daughter not sharing in the rent?

The property was purchased from an older member of the family through a family trust. "A" and "B" paid "C"'s contribution towards the purchase in the form of a gift. On the death of the older member of the family the family trust repaid the mortgage, granted by the deceased to purchase the property. "A" and "B" paid the contribution "C" should have made to redeem the mortgage and that sum was regarded as a gift.

All agree that the property is intended to provide an income to "A" and "B" in their lifetime and the property will revert to benefit "C" through a family trust on the death of "A" and "B"
Ramnik

I have not dotted the "i"s or crossed the "t"'s on this arrangement but it seems to be working. Have a feeling that now seven years have lapsed maybe we should sell the property to continue to gain tapered capital gain tax relief as we are now at the maximum. Don't know if there is any arrangement one can make to settle up to the current date. Looking at the increase in the value of the property shared between three and the maximum capital gains allowance to each we wouldn't have to pay much said in a very optimistic voice

Advice would be appreciated - thanks.

[Tax Accountant]

QUOTE: ''Advice would be appreciated - thanks''

To be honest, you need to have your arrangement
verified to ascertain its effectiveness in case it is challenged.

Ramnik

[SJB]

Karango

Many thanks for your advice - greatly appreciated. Exchanged contracts today, so I'll be using the advice very shortly...!

Stu

[Worldlife]

QUOTE: ''Advice would be appreciated - thanks''

To be honest, you need to have your arrangement
verified to ascertain its effectiveness in case it is challenged.

Ramnik

Seems this may not be a DIY job and it might be best to get some professional advice.

Thanks

[Tax Accountant]

Seems this may not be a DIY job and it might be best to get some professional advice.

Thanks

Based on how you are doing it at present, I would say so.

Ramnik