Tax on Rental income - not joint ownership

[starM]

Hi,

I bought a property which is just in my name. I will be renting this property out. Now my other half is a housewife and it will be best to transfer the land from single to joint names to maxmise my other half personal tax allowance.

The mortgage is just in my name. I have heard that I can create a Trust Dead stating that although legal ownership of the property is in my name, the beneficial ownership is shared 50/50.

Is that possible, if so how it can be done?

Thanks

[GJMSurrey]

My understanding (until an expert comes along later) is that yes, you will need to include your wife/partner on the deeds-registry first, and after that a separate deed or trust can be drawn up (and get this done carefully) specifying your separate beneficial interests. These could be 50/50, but could also be 99/1 etc.

The income can then be proportioned as such.

I am presently looking at doing this myself a I am in exactly the same situation, my wife working part time, and possibly not at all soon if our family plans work out!.

I assume two sets of tax returns would need be made in this case, although if profit income is less than £2500 for an individual s/he may advise their tax office who may simply ammend that individuals tax code to pay the minimum taxes due (almost certainly could be the case for a 1% beneficial owner).

What I do not know is if a partner is added to the registry and a trust deed drawn up 99/1, does this also mean that in an unfortunate case of divorce the partner would categorically receive 99% of the property?

[TaxationPete]

If you are the earner and recieve 1% of the the Income that you alread exceed the tax threshold and the the £2,500 comment is not relevant as it will be added to your other income and taxed appropriatedly.
It a divorce should take palce then yes yes the Declaration of Trust takes presidence W would benefit from 99% of the disposal. Regards Peter

[jeffrey]

My understanding (until an expert comes along later) is that yes, you will need to include your wife/partner on the deeds-registry first, and after that a separate deed or trust can be drawn up (and get this done carefully) specifying your separate beneficial interests. These could be 50/50, but could also be 99/1 etc.
No, even a sole proprietor could enter into a Trust Deed.

[jeffrey]

The mortgage is just in my name.
This is the crux. You would need the mortgagee's consent.
Moreover, you would need to keep a first beneficial; share in your own name up to the mortgage debt's balance; only the surplus could be shared-out.

[Telometer]

Beware SDLT if transferring mortgaged property.

[jeffrey]

Beware SDLT if transferring mortgaged property.
In a one-to-two Transfer, only the value transferred is potentially liable to SDLT.
Example:
1. Property is worth £500 000.
2. X owns it in sole name.
3. X mortgaged it to M for £300 000.
4. If X transfers a half-share to Y, placing the property in joint names and Y enters into joint-and-several mortgage covenants, the value of what X transfers is treated as:
a. 50% of (£500 000 minus £300 000); plus
b. 50% of £200 000;
which equals £200 000 (so SDLT @ 1% is due on that).
5. But if X wants to transfer 99% to Y, there'd be a problem unless:
a. they hold the first part of the value as beneficial joint tenants, up to the level of the mortgage debt; and
b. they hold only the balance as to 1%/99%.
6. In this case, SDLT is due on:
a. 50% of (£500 000 minus £300 000); plus
b. 99% of £200 000;
which equals £298 000 (so SDLT @ 3% is due on that).